Q2 2025 InMode Ltd Earnings Call
Operator: Good day and welcome to InMode's second quarter 2025 earnings results conference call. All participants will be in the 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, you may press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Miri Segal, CEO of MSIR. Please go ahead.
Good day and welcome to inm Mod's. Second quarter 2025 earnings results conference call.
All participants will be in the listen-only mode. Should you need assistance? Please signal the 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 1 on your telephone keypad.
to draw your question, you may press star then to
Please note this event is being recorded.
I would now like to turn the conference over to Mary. Sega CEO of msir, please go ahead.
Miri Segal: Thank you, operator, and everyone for joining us today. Welcome to InMode's second quarter 2025 earnings call. Before we begin, I would like to remind our listeners that certain information provided on this call may contain forward-looking statements, and the safe harbor statement outlined in today's earnings release also pertains to this call. If you have not received a copy of the release, please visit the investor relations section of the company's website. Changes in business, competitive, technological, regulatory, and other factors would cause actual results to differ materially from those expressed by the forward-looking statements made today. Our historical results are not necessarily indicative of future performance. As such, we can give no assurance as to the accuracy of our forward-looking statements and assume no obligation to update them except as required by law. With that, I'd like to turn the call over to Moshe Mizrahy, InMode's CEO.
Thank you, operator, and everyone for joining us today. Welcome to inmode second quarter 2025 earnings call. Before we begin, I would like to remind our listeners that certain information provided on this call, may contain forward-looking statements and the Safe Harbor statement outlined in today's earnings release. Also pertains to this call. If you have not received the copy of the release, please visit the investor relations section of the company's website changes in business competitive, technological Regulatory, and other factors would cause actual results to differ materially from those expressed by the forward-looking statements made today.
Our historical results are not necessarily indicative of future performance as such. We can give no assurance as to the accuracy of our forward-looking statements and assume no obligation to update them except as required by law.
Miri Segal: Moshe, please go ahead.
With that. I'd like to turn the call over to Moshe in modes, CEO. Moshe, please go ahead.
Moshe Mizrahy: Thank you, Miri, and to everyone for joining us. With me today, Dr. Michael Kreindel, our Co-founder and Chief Technology Officer; Yair Malca, our Chief Financial Officer; and Rafael Lickerman, our VP of Finance. Following our prepared remark, we will all be available to answer your questions. In the second quarter, we continue to navigate a challenging medical aesthetic market, especially in North America, due to reduced personnel spending. This environment results in fewer treatments and less capital investment from physicians, consistent with the macroeconomic trend of recent quarters. Building on the strategy we outlined last year, we have started restructuring a key part of our sales team to drive deeper market penetration. We have begun by appointing a specialized manager and a dedicated sales team focused on the Envision platforms for the ophthalmology market.
Thank you, Mary and, and to everyone for joining us with me today, Dr. Michael Kendall, our co-founder and chief technology officer Chief Financial Officer and Raphael deman, our VP of Finance.
Following our prepared remark, we will all be available for answer your question.
continue to navigate a challenging medical aesthetic Market, especially in North America due to reduce
Personal spending in this environment results in fuel treatment in fewer treatments and less capital investment from physicians, consistent with the microeconomic trend of the recent quarter.
Building on building on the strategy we outlined. Last year, we have started restructuring key. Part of our sales team to drive deeper Market. Penetration we have began by appointing, A specialized manager and dedicated sales team focused on The Envision platforms for the Opthalmology Market.
Moshe Mizrahy: At the same time, we are strategically expanding our global footprint with new direct operations in Thailand and Argentina. These offices will enhance our local presence, improve customer support, and streamline operations compared to walking through distributors. Looking ahead, we are hosting a user meeting in late August to officially launch our new platforms in the wellness space, focused on increased blood circulation and pain relief for the urology community. We conducted a soft launch during Q2 and began introducing the platforms to selected users and gathered early feedback. The full commercial rollout will take place at the August event, and we anticipate initial revenue contributions in the fourth quarter. In closing, we will continue to navigate the current market challenges. We remain confident in InMode's offering and brand recognition, backed by a strong balance sheet, a diversified portfolio, and cutting-edge technology.
As the at the same time we are strategically expanding our Global footprint with new direct operation in Thailand and Argentina. These offices will enhance our local presence improve customer support and streamline operation compared to walking through Distributors. Looking ahead. We are hosting a user meeting in late, August to officially launch. Our new Platforms in the wellness space focus on increased blood circulation and pain relief for the Urology Community. We conducted a soft Lounge during Q2.
Moshe Mizrahy: We are well positioned to continue leading the minimally invasive aesthetic and wellness industry. Now, I would like to turn the call over to Yair, our Chief Financial Officer. Yair.
Yair Malca: Thanks, Moshe, and hello, everyone. Thank you for joining us. I would like to review our Q2 2025 financial results in more detail. Despite global headwinds and the challenging macroeconomic environment, InMode Ltd. generated revenues of $95.6 million. As a reminder, when comparing year-over-year results, last year's quarterly revenues of $86.4 million excluded $16.2 million in pre-orders for new platforms, which had not yet been delivered by the end of Q2 2024. Our minimally invasive platforms accounted for 84% of total revenues this quarter. Sales outside of the U.S. accounted for $45 million, or 48% of overall sales, an 11% increase year-over-year. Europe was the largest geographical revenue contributor, reaching a record of $23 million. Gross margin remained strong at 80% on a GAAP basis, consistent with Q2 2024. These industry-leading margins continue to underscore the unique value that our platforms provide.
And begin introducing the platforms to selected user and gathered early feedback. The full commercial rollout will take place at the August event, and we anticipate initial Revenue contribution in the fourth quarter in closing, we will continue to navigate the current market challenges. We remain confident in in mode offering and brand recognition backed by strong balance sheet and diversified portfolio and Cutting Edge technology. We are well, positioned to continue leading the minimum invasive, aesthetic and wellness industry. Now, I would like to turn the call over to your ear, our Chief Financial Officer. Thank you.
Thanks Mo and hello everyone. Thank you for joining us.
I would like to review our Q2 2025 Financial results in more detail.
Despite global headwinds and the challenging microeconomic environments, we generated revenues of $95.6 million.
As a reminder, when comparing you over your results, last year's quarterly revenue of 86.4 million
Excluded $16.2 million in pre-orders for new platforms, which had not yet been delivered by the end of Q2 2024.
Our minimal invasive platforms, accounted for 84% of total revenues. This quarter.
Says outside of the US accounted for 45 million or 48% of overall sales and 11% increase over here.
Europe was the last geographical Revenue, contributor, reaching a record of 23 million.
Gross margin remains strong at 80% on a gap basis. Consistent with Q2 2024.
Yair Malca: Non-GAAP gross margins were 80% in the second quarter compared to 81% in Q2 of 2024. As part of our global expansion, we currently have a direct sales force of over 297 representatives and distributors' coverage in more than 74 countries. Sales and marketing expenses increased to $47.5 million from $45.1 million in the same period last year. The year-over-year increase reflects continued investment in our sales team, resulting in higher salaries and travel and entertainment costs. We also saw increased spending on trade shows and other marketing activities. These were partially offset by lower share-based compensation, which declined to $3.4 million from $5.2 million in the second quarter of 2024. GAAP operating expenses in the second quarter were $53.6 million, a 5% year-over-year increase. On a non-GAAP basis, operating expenses were $50.5 million in the quarter, up from $46.3 million, a 9% increase year-over-year.
These industry-leading margins, continue to underscore the unique value, that our platforms provide.
Nan, gaap, gross margin were 80% in the second quarter compared to 81% in Q2 of 2024.
As part of our Global expansion, we currently have a direct sales force of over 297 representatives and Distributors coverage in more than 74 countries.
Says in marketing expenses increased to 47.5 million from 4 to 5.1 million in the same period last year.
the year-over-year increase reflects continued investment in our sales team, resulting in higher salaries, and travel and entertainment costs,
We also saw increased spending on trade shows and other marketing activities.
These were partially offset by lower share based compensation, which declined to 3.4 million from 5.2 million dollars in the second quarter of 2024.
Gap. Operating expenses in the second quarter were 53.6 million, a 5% year-over-year increase
on an Ana basis. Operating expenses were 50.5 million
In the quarter, up from 46.3 million, and a 9% increase year-over-year.
Yair Malca: GAAP operating margin was 24%, up from 21% in the second quarter of 2024. On a non-GAAP basis, operating margin reached 28% compared to 27% last year. GAAP net income was $26.7 million, up 12% from $23.8 million. On a non-GAAP basis, net income was $30.1 million, up from $29 million. GAAP diluted earnings per share for the second quarter were $0.42, a significant increase from $0.28 in Q2 of 2024. Non-GAAP diluted EPS was $0.47, up from $0.34 per diluted share in the second quarter of 2024. We ended the quarter with a strong balance sheet. As of June 30, 2025, the company had cash and cash equivalents, marketable securities, and deposits of $510.7 million. This quarter, InMode Ltd. generated $24 million in cash from operating activities. If current U.S. tariffs remain at 10%, we expect gross margins to be impacted by approximately 2% to 3%.
Quarter of 2024.
Basis, operating margin reached. 28% compared to 27% last year.
Gaap. Net income was 26.7. Million up, 12% from 23.8 million.
Basis, net income was 30.1 Million up from 29 million.
Gap, diluted earnings per share for the second quarter were 42 cents. A significant increase.
From $0.28 in Q2 of 2024.
Non-GAAP diluted DPS was 47 cents, up from 34 cents per diluted share in the second quarter of 2024.
We ended the quarter with a strong balance sheet as of June 30th, 2025 the company had cash and cash equivalents marketable, Securities and deposits of 510.7 million.
This quarter in more generated, 24 million dollars in cash from operation from operating activities.
If current US tariffs remained at 10%, we expect gross margins to be impacted by approximately.
Yair Malca: We continue to closely monitor the situation and will adjust our forecast and strategy as needed. Before I turn the call back to Moshe, I would like to reiterate our guidance for 2025. Assuming the slowdown in our industry continues and interest rates remain at current levels, we expect revenues between $365 million to $375 million, compared to previous guidance of $395 million to $405 million. Non-GAAP gross margins to be the same as in previous guidance, between 78% and 80%. Non-GAAP income from operations between $93 million and $98 million, compared to previous guidance of $101 million to $106 million. Non-GAAP earnings per diluted share between $1.55 to $1.59, compared to previous guidance of $1.64 to $1.68. I will now turn over the call back to Moshe.
2 to 3%.
We continue to closely monitor, the situation and will adjust our forecasts and strategy as needed.
Before I turn the call back to Moshe, I'd like to reiterate our guidance for 2025.
Assuming the slowdown in our industry, continues and interest rates remain at current current levels.
We expect revenues between $365 million to $375 million.
Compared to previous guidance of 395 million to 445 million.
Nan Gap goes, margins to be the same as in previous guidance between 78% and 80%.
Nand Gap income from operations, between 93 million, and 98 million compared to previous guidance of 101 million to 206 million dollars.
N Gap earnings per the user chair between $1 and 555, cents to $159 compared to previous guidance of $1.64 to $168.
Moshe Mizrahy: Thank you, Yair. Operator, we are ready for Q&A. Please.
I will now turn over the call back to Moshe.
Your operator. We are ready for Q&A, please.
Operator: Certainly, thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Matt Miksic with Barclays. Please go ahead.
Certainly, thank you. We will now begin the question and answer session.
To ask a question, you may press star, then 1 on your telephone keypad.
If you were using a speaker-phone, please pick up your handset before pressing the keys.
if at any time your question has been addressed and you would like 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 Matt mixing with Barclays, please go ahead.
Matt Miksic: Hi. Thanks so much. Thanks for taking the question. Maybe if you could talk a little bit about the two things. First, I think there were some dynamics in Q1 that drove, I think, what you described at that time, some slightly below-expectation results for Q1 that didn't quite warrant a reduction. Some of that here continued in Q2. I just wanted to get a sense of the cadence of what that looked like. I think Q1 there was a great deal of uncertainty toward the end of March. That may or may not have influenced buying behavior, timing of purchases, and that sort of thing. I am just wondering, qualitatively, or if you could quantitatively describe how that compares to Q2 and then the back end, particularly at Q2 when you close most of your console deals. I have just one quick follow-up.
Hi. Uh, thanks so much. Uh, thanks for taking the question. Um, so maybe um if you could talk a little bit about you know, 2 things first
I think there were some dynamics and a few ones that drove, uh, I think what you described at that time, some slight, you know, below-expectation results for you on. That didn't quite warrant, uh, you know, a reduction of some of that here continued in Q2. I just wanted to get a sense of the cadence of what that looked like and what you want those great deals on certainty towards the end of March may or may not have influenced, you know, buying behavior, timing of purchases or that sort of thing, and just wondering.
You know, just just, just qualitatively or if you could quantitatively uh describe how that compares to compute uh 2 and and the back end, particularly if you do when you close most of your uh most of your console deals and then I have just 1, quick follow up.
Yair Malca: As you remember, we discussed it after Q1. We did come a little bit below our expectation in Q1. The same thing happened here in Q2. Now we have already two quarters behind us, and we kind of missed a little bit most of them. Not drastically, but definitely we saw some weakness in Q1 and also in Q2. Taking this into consideration, looking ahead to the remainder of the year, with all the uncertainty that we are seeing, we thought it is the right thing to do to make this one-time adjustment to our guidance. Does that answer your question?
So, as you remember, we discussed it after q1. Uh, we did come a little bit below our expectation in, q1 and same thing happened. Uh, here in, uh, Q2 uh. So now we have already 2 quarters, uh, behind us. And we kind of missed a little bit, most of them not drastically. But uh, definitely we saw some weakness in q1 and also in Q2. Uh, so taking this in because in to consideration looking ahead to the remaining remainder of the year, with all the uncertainty that we are seeing. We thought it's the it's the right thing to do to make this 1 time adjustment to our guidance and
So question.
Matt Miksic: Yeah, I mean, it partially, and thank you for that. I just was trying to get a sense of, you know, there seemed to be quite a bit more uncertainty in March and April than there is now, frankly, or capital purchases or business investment or anything. I am just wondering if any of that came through or not in what you saw and the way the quarter shaped up, even though both, you know, at the face of it, were slightly below expectations. Any difference in that way, or does it just look like two quarters that did not quite hit what you hoped?
Yeah. I mean it was partially and thank you for that. It just was trying to get a sense of um, you know, there seem to be quite a bit more uncertainty in March, and April than there is now frankly and capital purchases or business investment or anything. And I'm just wondering any of that came through or, um, or or not in, in your uh, in in what you saw in the way that the way the quarter shaped up even though both, you know, the face of it were, were slightly below expectations. Um,
Any any any difference in that way or is it? They just look like 2 quarter hit hit would you hoped?
Yair Malca: This is Moshe. As you know, the business that we are in, medical aesthetic, has some seasonality effect. Typically, the first quarter is not very strong. I do not say it is like Q3, but it is not very strong. Q2 is one of the strongest quarters. According to the seasonality model of the medical aesthetic industry for many years, the first quarter is basically 20%, and the second quarter should be 25%. If the original guidance was $400 million, we were supposed to do $80 million in the first quarter and $100 million in the second quarter. But we missed both quarters. In the first quarter, we did only $77 million, and the second quarter, $95.5 million. So the difference between the two of them, if you calculate the third and the fourth quarter, brings us to the new guidance. But it is all, as you know, estimation.
Well uh this is mushe. Um as you know um the business that we're in, medical aesthetic is some seasonality effect.
Uh typically the first quarter is uh, is not very strong. I don't say it is like Q3, but it's not very strong and Q2 is the 1 of the strongest quarter.
So, I mean, according to the seasonality model of the medical aesthetic industry for many years, the first quarter is basically 20%, and the second quarter should be, uh, 25%.
Yair Malca: If we do better, we will improve the guidance. But we try to be conservative as usual in order not to promise something that we are not sure we can achieve.
So if the original guidance was 40 million 4, 400 million, we were supposed to do, uh, 80 million in the first quarter and uh, and 100 million in the second quarter. But we missed both quarters in the first quarter. We did only 77 and the second quarter, uh, 95.5. So, uh, the difference between the 2 of them, um, if you calculate the the third and the fourth quarter, bring us to the new guidance. But it's all as you know, estimation, if uh, if we do better will will improve the guidance but we try to be conservative as as as usual in order not to promise something that we're not sure we can achieve.
Moshe Mizrahy: At the moment, we do not see any change in behavior, if that is what you are looking for. If we see any change in behavior, the answer is no. We do not see any change in behavior between Q2 and Q1. The market still continues to be challenging.
At the moment, we don't.
Matt Miksic: That's helpful. Then just a quick one on guidance, it seems like you talked often about maintaining your organization in advance of and in anticipation of a turn in the cycle. So rather than comp line coming down and tightening your belt to sort of hit a higher EPS number just for the sake of hitting that commitment, you're taking a view that gets you sort of through this flat part of the cycle and into the upswing of the cycle to remain invested. Just if you could talk a little bit about that strategy, if that's changing at all, if you're still committed to that, and any sense or ideas that you have on the timing of when we might start to see things pick up. Thanks.
Change in Behavior. If that's what you're looking for. If we see any change in Behavior. Yeah, yeah. So the answer is no. We we don't, we do not see any change in Behavior, Uh, between Q2 and q1, the market still continue to to be challenging.
That's helpful. And just a quick 1 on guidance is, is that, um, you know, it seems like you're, you're, you're uh, you have a you talk often about, uh, maintaining your organization.
You know, in advance of in anticipation of a turn in the cycle. So, uh, rather than, you know, complain coming down and tightening your belt to sort of, you know, hit hit a in a higher ups number just for the sake of of committing, you know, hitting that commitment, you, you're taking a view, gets just really through the through this flat part of the cycle and into the upswing of the cycle to remain invested. Just if you could talk a little bit about, you know, that strategy, if if that's changing at all, if you're still committed to that and and uh and any sense or uh uh ideas that you have on on the timing of what we might start to see things pick up.
Thanks.
Yair Malca: Again, we remain positive on the long-term potential of the market. Yes, we are experiencing a temporary weakness. How long it is going to last, we do not know, but we believe at some point the market will recover and will come back. In terms of making the necessary investment in some part of the world, we are expanding and going direct in more countries because we think that is the right thing to do. In the U.S., we see that the headwinds are significantly stronger than what we experience in Europe and Asia. We do not have any concrete plan or downsizing the company. We do not need to, but definitely we are looking to make sure we have the best structure in place to stay competitive.
Again, we remain positive on the long-term potential of the market. Yes, we are experiencing a temporary weakness. How long it's going to last, we don't know. But we believe that at some point the market will recover and will come back.
In terms of making the necessary investment in some part of the world, we are expanding and going direct in more countries because we think that's the right thing to do. In the U.S., we see that the headwinds are significantly stronger than what we experience in Europe and Asia.
A we don't have any concrete plan or downsizing the company. We don't need to but definitely we are looking to make sure we have the best structure uh, in place, uh, to stay competitive.
Matt Miksic: Fair enough. Thanks so much.
Fair enough. Thanks so much.
Operator: Thank you. Our next question is from Danielle Antalffy with UBS. Please go ahead.
Thank you.
Danielle Antalffy: Yeah. Hi. Good morning, everyone. Thanks so much for taking the question. Just one question on capital allocation, Moshe, for you. Then I have a specific question on non-invasive and the strength we saw there. On capital allocation, Moshe, I know you guys have done some share repurchasing. You still have like $600 million in cash on hand as of, I think, the end of June. Just maybe talk a little bit about where your priorities are, how they're changing, whether you're still exploring assets to potentially acquire. Then I'll ask my follow-up on non-invasive. Thanks.
Hand. As of, I think the end of June so just maybe talk a little bit about, you know, where your priorities are, how they're changing, whether you're, you know, still exploring assets to potentially acquire. And then I'll, I'll ask my follow-up on on that invasive. Thanks.
Yair Malca: Okay. As far as capital allocation, I believe we are giving the same answer all the time. We did $508 million of buyback in the last two years, which was a lot. If we will do additional buyback in Israel, it will require 20% dividend tax. We are considering it. I am not saying we are not. It is one of the options. Every type of capital allocation is considered all the time, and it is on the table. We do not have any acquisition on the pipeline, so I cannot announce that we are doing any acquisition this year. As far as dividend, it might, but it also requires dividend tax. Basically, everything is possible. We will need to see how the continue of the year will go, and probably we will make a decision sometime in the next six months.
Okay, if as far as capital allocation, I believe we're giving the same answer all the time. Um, we did, we did 508 million of buyback, uh, in the last 2 years, uh, which was a lot. I mean, uh, if we, uh, if we will do, uh, additional buyback in Israel, uh, it will require, uh, requiring, requiring 20%, uh, dividend tax. So, we are doing it. I'm not saying we're not, it's 1 of the option. Uh, so every every type of capital, allocation, uh, is considered all the time and it's on the table. Uh, we don't have any, any acquisition on the pipeline. So I cannot announce that, uh, that, you know, that we're doing any acquisition, uh, uh, you know, this year, uh, as far as, uh, as far as dividend, uh, it might, but it also require, uh,
Danielle Antalffy: Okay, gotcha. Then one area of strength, at least relative to what we were modeling, but also I think versus last year, very strong growth in non-invasive. Just wondering what is driving that. Is it a new product cycle? Is it just customer behavior? Is that something that is notable? Is it one-time in nature? Maybe talk a little bit about that and the mix of non-invasive versus minimally invasive.
Yair Malca: Well, as you know, minimally invasive procedures are relatively expensive. Either BodyTite, FaceTite, Quantum RF handpieces, Morpheus8, which can go up to 8 millimeters, they are relatively expensive. They require local anesthesia, either by blocking, tumescent, and other types of local anesthesia. The range of one treatment can be in between $1,500 and $4,000 or $5,000. The non-invasive procedures are much cheaper: laser, IPL, non-invasive RF. We see some trend that the minimally invasive, which is relatively, you know, requires more personal spending. I do not want to say go down, but the number of procedures is going down. Therefore, we see a little bit of a trend toward the non-invasive handpieces and platforms. That is what happened in Q2. In addition, we came up with the platforms, which are called OptimasMAX.
You know, dividend tax. So, basically, everything is possible, we will need to see how the the continued of the year will go and probably will make a decision sometime in the next 6 months. Okay, gotcha. And then, you know, 1 area of strength at least relative to what we were modeling but also I think versus last year very strong growth in uh, non-invasive just wondering what's driving that, um, is it a new product cycle? Is it just customer behavior? Is that something that's notable? Is it 1 time in nature? Maybe talk a little bit about about that in the mix. Um, of non-invasive versus minimally, okay. Okay, okay, okay. Okay.
Well, um, as you know, minimally invasive procedures are relatively expensive.
Uh, either body type, face type Quantum, uh, morphus. Uh, which can go up to 8. Mm. They are relatively expensive and they require a local anesthesia either by blocking 2% and other type of local anesthesia. So the range of 1 treatment can be in between 1500 and, uh, and uh, and 4 or 5 thousand dollars. Uh, the non-invasive procedure, uh, much cheaper, uh, laser IPL, nana nana, nana, nana, nana, nana, nana, nana nana, nana, invasive RF,
Uh, so, uh, we see some trends that the minimally invasive procedures, which are relatively, uh, you know, require more personal spending, I don't want to say they are going down, but the number of procedures are decreasing.
And therefore, uh, we see a little bit of a trend toward the non-invasive hand pieces and platforms, and that's what, uh, that's what happened in the second quarter in addition. Uh, uh, uh, you know, uh, we came up with, uh, with the platforms which call Optimus Optimus Max,
Yair Malca: OptimasMAX has a new type of IPL, IPL Peak, and a new type of laser for hair removal and also for blood vessels. This platform is very successful, and therefore, this part of the market is non-invasive. Yet, the biggest part of our business is still invasive, penetrates the skin, and either one is almost more than 80%. It is a high number.
Danielle Antalffy: Gotcha. Thank you, Moshe.
And Optimus Max has a new type of IPL, IPL, pick and a new type of laser for, uh, for a removal. And also for, uh, for blood vessels. And this platforms is very successful. And therefore, this part of the market is non is non invasive. Uh, well, but yet the most, uh, the biggest part of our business is still, uh, invasive penetrate the skin. And, uh, either, either either 1 is uh, uh, it's almost more than 80%. So, it's a high number.
Gotcha. Thank you Moshe.
Operator: Thank you. Our next question comes from Michael Sarcone with Jefferies. Please go ahead.
Thank you.
Our next question comes from Michael Cerrone with Jeffrey. Please go ahead.
Matt Miksic: Hey, good morning, and thanks for taking our questions. This is Mike on for Matt this morning. I guess just to start, Moshe, some clarifying questions around your commentary on guidance. I think you mentioned with that $400 million original guide, you were a little light in Q1 and Q2. To me, it looks like you were maybe $7 or $8 million light in the first half versus those original expectations. I think you also said that is kind of the reason you lowered the guide, but you lowered it by about $30 million at the midpoint. Could you just clarify that? Have you also lowered your outlook for the second half?
Hey, good morning, and thanks for taking our questions. This is Mike on for, for Matt this morning I guess just to start uh, Moshe some, some clarifying, uh, questions around your, your commentary on guidance. I think you mentioned with that 400 million dollar original guide, you were a little light in 1 q and 2q and to me it looks like you were maybe 7 or 8 million dollars light, um, in the first half versus those original expectations. I think you also said that's kind of the reason you lowered the guide, but you lowered it by about 30 million at the midpoint. So, could you talk, could you just clarify that, you know, have you also lowered, your, your outlook for the second half?
Yair Malca: As you know, the third quarter is usually a very slow quarter, especially in Europe because of the summertime and the vacations. In recent years, we see that effect also in the U.S. market and also in the Canadian market. So basically, in order to achieve the $400 million, we thought we would do $100 million in the third quarter and $120 million or $125 million on the fourth quarter. Based on the slowdown and the slow market that we experienced in the second quarter, we do not think that that is achievable, $220 million. This is why we reduced the budget at that target.
Slow quarter specially in Europe because of the summertime and the vacations.
Uh, in recent year, we see that effect also uh uh in the in the US market and also in the Canadian Market.
So basically uh, in order to achieve, uh, the 400 million dollars, we thought we will do uh, 100 million in the third quarter and uh, and uh, 120 million or 125 on the fourth quarter based on the Slowdown and uh and uh um uh and the slow Market that we experience in the second quarter. We don't think that this is achievable 220 million and this is why we reduced the budget at that Target.
Matt Miksic: Got it. That is very helpful. Can you comment on any contribution that you may have included from the urology end markets in the Q4 quarter?
Got it, that’s very helpful. And then I guess, um,
Can you comment on any kind of uh contribution that you may have included from uh the Urology?
And markets in the 4q quarter.
Yair Malca: is minimal. I think it is going to be a minimal contribution. That is usually what we do. Every new launch of a product, we do not count too much on contribution. It would be more symbolic than anything. Again, if we will be pleasantly surprised, we will take it, but we do not count on it.
It's it's it's minimal. Uh I think it's going to be a minimum contribution. That's usually what we do with every uh new launch of the products. Uh, we don't count too much on contribution. Uh, it's will be most symbolic than anything and again, if we'll be pleasantly surprised, we'll take it but we don't count on it.
Matt Miksic: Okay. Thank you.
Okay, thank you.
Operator: Thank you. The next question comes from Caitlin Cronin with Canaccord Genuity. Please go ahead.
Thank you.
The next question comes from Caitlyn Cronin with canaccord genuity. Please. Go ahead.
Danielle Antalffy: Great. Thanks for taking the question. I guess just to start and really expand on the urology question earlier, just any more details on the urology market and the opportunity, and if you are going to use a dedicated sales team like you are going to do for the Envision platform.
Great. Thank you for taking the questions. Um I guess just to start and really expand on the Urology question earlier just any more details on the Urology market and the opportunity and and if you'll use a dedicated sales team, like you're going to do for for The Envision platform
Yair Malca: Okay. Let's start with the urologist. As you know, we're developing a platform for the erection dysfunction, but we don't have the indication from the FDA yet. So we are launching it on a pilot level for blood circulation and pain relief. We're doing some clinical testing right now to prove the concept. Therefore, this is, although we are launching the platforms, eventually, once we have the FDA indication for erection dysfunction, these platforms will be much more successful. Right now, we have to be very careful with how we do it and under IRB and other all kinds of regulatory procedures. Regarding the Envision, the Envision platform is for dry eye and full face rejuvenation. Again, we don't have the FDA indication approval for the dry eye yet. It's in the process.
Okay, um, let's start with the urologist.
As you know, uh, we're developing, uh, a platform uh, for the erection dysfunction.
Uh, but we don't have the indication from the FDA yet.
So, uh, we are launching it, uh, on a, on a pilot level, uh, for blood vessel, uh, blood circulation, and and Pain Relief. Uh, we're doing some clinical testing right now to prove the concept and therefore, this is, uh, although we are launching the platforms. Uh, but eventually, once we have the FDA indication for erection dysfunction, this platforms will be much more will be successful. Uh, um, right now we have to be very careful with how we do it and uh, and under IRB and other all kind of, uh, regulatory.
Yair Malca: We have submitted to the FDA the protocol, and we're going to pull it and start the study. We submitted all the pilot and all the clinical data that we had. Once we have the approval from the FDA for dry eye treatment with the bipolar RF, again, this platform will fly. Yet, it's in early stage. We're not promoting it directly for dry eye because we cannot. Every test and every study that we do is under regulatory procedures like IRB, etc. Those two platforms in the wellness business were in the middle of regulatory procedures and regulatory submissions. Hopefully, sometime next year, they will be approved.
Procedures, uh, regarding the Envision. The Envision platforms is, uh, is for, uh, dry eye and full face Rejuvenation. Um, again, we don't have the FDA, uh, indication approval for the dry eye yet. Uh, it's in the process. Uh, we have submitted to the FDA the protocol and, uh, and uh, it's that we're going to prove it and start the, the study, we submitted all the pilot and all the clinical data that we had. Once we have the approval from the FDA for erection for, uh, dry eye treatment with the bipolar RF again, this platform will fly and yet it's, uh, it's uh, in early stage. Uh, we're not, uh, promoting it, uh, directly for the I because we cannot. Uh, and every every test and every study that we do is under regulatory procedures,
Like IRB Etc. And uh, those 2, those 2 Platforms in the wellness business uh were in the middle of regulatory uh procedures and Regulatory submissions, hopefully sometime next year or they will be approved.
Danielle Antalffy: Great. You know, I think you talked about last quarter, just given the relative strength, OUS and Europe in particular, you were expecting somewhat of a larger skew in the mix to OUS versus U.S. Is that still something that is contemplated in your guidance for this year?
Great. And, you know, I think you talked about last quarter just given the relative strength. Um, oh us and and Europe in particular, you were expecting, you know, somewhat of a a larger skew in the mix um to owe us versus US. I mean, is that still something that's contemplated in in your guidance for this year?
Yair Malca: Yes. It is built into the guidance already. As you know, in previous years, the split between U.S. and OUS was about 60% to 65% U.S., and the rest is OUS. Now it's more in Q1. In Q2, it was more a 50/50 split, and that was the assumption that it will remain 50/50 for the rest of the year. It's already built into the guidance.
50/50 split. And that was the assumption; it will remain.
Uh, 50/50 for the rest of the year and it's already built into the guidance.
Danielle Antalffy: Great. Thanks so much.
Great. Thanks so much.
Yair Malca: Yeah.
Yeah.
Operator: Thank you. Our next question comes from Jeff Johnson with Baird. Please go ahead.
Thank you.
Our next question comes from Jeff. Johnson with bed. Please go ahead.
Jeff Johnson: Thank you. Good morning, guys. Moshe, maybe if I could follow up on some of your Envision comments. You know, we've been out there kind of doing some checks, kind of have heard of a decent number, I would say, of Luminous account conversions and wins for you guys. Would it be crazy, as Danielle asked about the non-invasive number that was strong this quarter, to think that Envision also contributed to that? I know you're still waiting for the dry eye indication, but our back-of-the-envelope math, maybe it was as much as 5% or 10% of your U.S. system sales in Q2. I'm sorry, could have been Envision. Would that be too high of a number? Thanks.
Thank you, good morning, guys. Uh, Moshe, maybe if I could follow up on some of your Envision comments. You know, we've been out there kind of doing some checks, kind of have heard of a decent number. I would say of luminous, uh, account conversions, uh, in wins for you guys. Would it be crazy as Danielle asked about the non-invasive number that was strong, this quarter to think that Envision also contributed to that, I know you're still waiting for the dry eye indication, but our back of the envelope map, maybe it was as much as 5 or 10% of your us system sales in 1, in 2 Q. I'm sorry. It could have been envisioned. Would that be too high of a number? Thanks.
Yair Malca: 10% to 15%, it is relatively high. I would say it is more like 10% or a little bit less than that, but not more than that before we get the FDA. Now, regarding Luminous, Luminous has the approval on the IPL and not on the RF. Everybody knows we also have IPL on the system, on the Envision, and doctors can use either the IPL, which is approved like Luminous, or the RF. But the RF needs to be done under regulatory procedures and local approvals.
uh,
10 to 15%, It's relatively High. I I will say it's more like a 10% or a little bit less than that. But not not more than that before we get the FDA now. Regarding luminous luminous has the approval on the IPL and not on the RF everybody knows we also have IPL on the system on The Envision and DRS can use uh either the IPL which is uh which is approved like luminous.
Uh or uh, or the RF. But the RF need to be done under regulatory procedures and uh and uh and uh and local and local approvals.
Jeff Johnson: All right, fair enough. My question was, could it be 5% to 10% of your U.S. system sales, not 10% to 15%? It sounds like you are saying yes there. I just want to clarify, you think 5% to 10% is a reasonable U.S. system revenue for InMode Ltd. for this quarter?
Yair Malca: Correct.
All right, fair enough. And my question, my question was, could it be 5 to 10% of your us system sales? Not 10 to 15? So it sounds like you're saying, yes there. I just want to clarify, you think 5 to 10 is a reasonable us system revenue for Envision for this quarter.
Jeff Johnson: Okay. Great. Then, sorry, Yair, you talked about no change in behavior throughout the quarter. Would that comment be applicable to both kind of the doctor side of the equation on purchasing capital and on the patient side on the procedures and consumables side, that consumables number getting closer to flat, so maybe getting a little bit of improvement on the patient demand side? Just if you could disaggregate your comment on no change in behavior across both system purchases and/or patient demand, that would be helpful. Thanks.
Yair Malca: Sure. Just one quick comment about your previous question. The fractional laser CO2 platform that we launched earlier this year, this one is also included in the non-invasive, and that is one of the reasons why we see this jump. Regarding your second question, yes, it might be better to separate between the two, the trends that we see in the capital equipment, that this has stayed pretty similar for the last several quarters, you know, with the high interest rate and challenging with financing and the uncertainty in the market. I think you see many doctors probably delaying their purchasing decisions on capital equipment. Consumables behave a little bit differently. This is more subject to discretionary spending by consumers, and we see some challenges there. But as you mentioned, it looks like the decline kind of plateaued.
Correct. Okay great. And then most uh uh sorry are uh you you talked about no change in Behavior throughout, the quarter would would that comment the applicable to both kind of you know, the doctor side of the equation on purchasing capital. And on the patient side on the uh procedures and consumable side that consumables number getting closer to flat. So maybe getting uh you know a a little bit of improvement on the patient demand side, but just if, if you could disaggregate your comment on, no change in Behavior across both uh system purchases and or uh patient demand, that would be helpful. Thanks.
2 just 1 quick, comment about your previous question, uh the CO2 device that we launched earlier this year. This 1 is also included in the noninvasive and that's 1 of the reason why you see this uh, jump
Yair Malca: So I guess we can see it as a positive that we stopped the bleeding, and hopefully, when things improve, we will start seeing that climbing back up.
Uh, regarding to, uh, your second question, uh, yes. It might be better to separate between the, the 2, the trends that we see in the Capital Equipment that this has stayed pretty similar for the last several quarter, you know, with the high interest rate and the challenging with financing and uncertainty in the market. I think you see many doctors, uh, probably delaying their purchasing decisions on Capital Equipment. Uh, consumers, behave a little bit differently. This is more subject to uh this this questioner is spending by consumers and we see some challenges there, but as you mentioned it looks like the the decline kind of plateau. And so I guess we can see it as a positive and that we stop the bleeding. And hopefully when things improve we will still, we will
Start seeing that climbing back up.
Jeff Johnson: Thank you.
Thank you.
Operator: Thank you. Our next question comes from Mike Matson with Needham & Company. Please go ahead.
Thank you.
Our next question comes from Mike Matson with nethermine company. Please go ahead.
Mike Matson: Yeah, thanks. So, just a question on the tariff impact. I think the press release mentions a tariff rate of 10%. I thought the rate on Israel was 17%. Was that lowered to 10%? Then, just the 2% to 3% they were calling out impact to gross margin from tariffs, is that for the full year? Is that going to be, is there any kind of timing there in terms of hitting maybe more in the second half of the year or something?
Yeah, thanks. So just a question on the, the Tariff impact. So I think the press release mentions a tariff rate of 10%. Um, I thought the rate on Israel was 17 was that lower to 10 and then just the 2 to 3% they were calling out impact to growth margins from tariffs is that for the full year and you know, is that going to be is, is there any kind of timing there in terms of it hitting maybe more in the second half of the year or something?
Yair Malca: You are right. The original tariff was set at 17%. It was reduced to 10% on a temporary basis, and it was extended. I am sure there is some negotiation going on between Israel and the U.S. administration. Our assumption right now is that it is going to remain at around 10%. It can be higher. However, we are also working to see if we can make some strategy changes that would help us actually bring this even lower. I think going with an average of 10% at this point is the right thing to do because this is what we are currently paying. Once we have updates this way or another, we will provide an update. Regarding the 2% to 3% impact, that is on an annual basis.
Remained around 10%, it can be higher. However, we are also working to see if we can make some strategy changes that would help us actually bring this even lower. So I think going with an average of 10% at this point, is the right, uh, right thing to do, uh, because this is what we are currently paying. And, uh, once we have updates, these were another, uh, we will provide an update.
Yair Malca: Probably, in 2025, because we did not have the tariffs from the beginning of the year and some of the inventory that we already have in the U.S. was not subject to this tariff, the impact would be lower, probably half than that. We basically thought that, like Europe and other countries, Israel will reach an agreement before the end of Q2, but not yet. I believe that by the end of August, President Trump gave the deadline. I believe by then, it will be settled, and probably it will be 10%, or in Europe, it is 15%. I do not think we will get to 15%, but it is all guessing.
Regarding the 2 to 3% impact, that's on an annual basis. So probably, you know, in 2025 because we didn't have the tires from the beginning of the years and some of the inventory that we already have in the US was not subject to this uh, tariff, the impact would be lower probably half than that.
We thought, we basically thought that like Europe and other countries, that Israel will reach an agreement before the end of the of the second quarter.
Uh, but not yet. Um, I, I, I believe that, uh, that by the end of August, uh, uh, president Trump Gap. Uh, that's the, the deadline I Believe by then, uh, it will be settled and probably it will be 10% or, you know, in Europe, it's 15%. I don't think we'll get to 15%, but
It's all guessing.
Mike Matson: Yeah, I understand. Okay. Just to be clear, the 2% to 3% is a fully annualized number in terms of what the impact would be if you were paying the 10% over the full year.
Yeah, I understand. Okay, it's pretty clear. So the 2 to 3% that's a fully annualized number in terms of what the impact would be.
Yair Malca: Correct.
Mike Matson: Okay. Then just a question on the new urology system that you are launching. Can you maybe just talk about the initial labeling that you are going to have there and how you are, I guess, for the urology-specific treatments on it, and how you are going to market that? This user meeting, I assume that is focused on urologists, correct? Are you going to be hosting a group of urologists?
If you were paying the the 10% for the full year. Um okay. And then um
Just the question on on the new Urology um system that that you're launching. Um can you maybe just talk about the the initial labeling that you're going to have there and and how you're you know I guess for the Urology specific you know uh treatments on it you know and and how you're going to Market that and then this user meeting I assume that's focused on neurologists. Correct. You're going to be hosting group of urologists.
Yair Malca: This particular platform, yes, it's for urologists. The development continues towards getting an indication by the FDA for erection dysfunction. We're doing clinical studies right now in major hospitals and in a major clinic that deals with this indication in the U.S. In the meantime, the approval that we receive for these platforms, bipolar RF, is basically for increased blood circulation, pain relief, and also collagen building, which are the basic three elements for erection dysfunction. Not yet with the final indication. Hopefully, in the future, we have.
This particular platforms. Yes, it's for urologist.
The development continued to get an indication by the FDA for erection dysfunction.
Uh we're doing clinical study right now in a major hospitals and in a major uh you know, Clinic that deal with this uh, indication in the US.
The, in the meantime, the approval that we receive for this platforms. Bipolar RF is basically for increased blood circulation. Uh, pain relief and also uh, collagen collagen building which are the basic 3 element for erection dysfunction, not yet with the final indication. Hopefully, in the future, we have
Mike Matson: Okay. Got it. Thank you.
Okay, got it. Thank you.
Operator: Thank you. Our next question comes from Sam Eiber with BTIG. Please go ahead.
Thank you.
Our next question comes from Sam Iber with btig. Please go ahead.
Jeff Johnson: Hi. Good morning. Thanks for taking the questions here. Maybe just coming back to Europe for a second. You know, two straight quarters here of growth in capital equipment outside the U.S. So we would love to hear, maybe is that a reflection more of a more stable environment? Are you launching new products there, taking price? Then how sustainable do you think some of those trends are?
Hi, good morning. Thanks for taking the questions here. Maybe just coming back to Europe for for a second. Um,
You know, 2 Straight Quarters here of growth and and Capital Equipment outside the US. So um we'll love to hear maybe is that a reflection more uh of a more stable environment? Um are you launching new products? There taking price. And then how sustainable do you think some of those Trends are
Yair Malca: I think they are very sustainable because just to remind everyone, we started in the early years focusing on developing the North American market mainly. We were a little bit late to the game in developing the OUS, the international markets, which is what we are doing right now. We used to be a smaller player in the international markets, and that's definitely one of our growth engines in the year to come. So it's very sustainable.
I I think there are very sustainable because uh just to remind everyone we started uh in the early years we focusing on on developing the North American Market mainly and we were a little bit late to to the game in developing the all us the international markets which is what we are doing right now. We we used to be a smaller player uh in in the international markets and and that's definitely
A 1 of our growth engines in the year to come. So it's a very sustainable
Jeff Johnson: Okay. That is helpful. Moving to the U.S. here, are we starting to see any kind of upgrade cycle with IgniteRF and OptimasMAX? I know it is a question we typically ask every quarter, but are you offering discounts yet for customers to upgrade? Is there any way to quantify that contribution?
Okay, that's helpful and then uh moving to the US um here you know are we starting to see any kind of upgrade cycle with with Ignite and an optimist Max? Um you know I know it's a question we we typically ask every quarter but are you offering discounts yet for for customers to upgrade? Um and is there any way to count uh quantify that contribution?
Yair Malca: We will probably start doing it on the third quarter, trying to convert users that use the Optimas and the body type, which are both fully, not similar, but fully FDA approved, with the IgniteRF, which is fully FDA approved, and the OptimasMAX as well. We will probably start doing it in the third quarter. At the same time, we are introducing those platforms in ROW as well.
Yeah, we we will, we will probably uh, start doing it on the third quarter. Uh,
Uh, uh, fully, uh, uh, uh, not similar but, uh, but fully FDA approved with the Ignite, which is fully FDA approved. And, uh, The Optimist Max as well. Uh, we will probably start doing it, uh, in the third quarter. And at the same time, we want to introduce those platforms in ROW as well.
Jeff Johnson: Okay. Helpful. Thanks for taking the questions.
Okay, helpful. Thanks for taking the questions.
Operator: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Moshe Mizrahy for any closing remarks.
Thank you.
This concludes our question-and-answer session.
I would like to turn the conference back over to Moshe Mizrahi for any closing remarks.
Yair Malca: Thank you, everybody. Thank you for joining us today. I believe we covered all aspects of the financial results that we usually present. Hopefully, the market will improve in the next two quarters, especially on the fourth quarter, which is usually the strongest quarter. We are going to be there. I know that one question was asked whether or not we are cutting down costs. We are a technology company, and if we will cut down costs, that means that we will fire engineering people and good salespeople. We do not want to do it. We are adjusting our costs in the manufacturing and the logistics, but all the rest, we keep business as usual in order to jump on the market whenever the market will improve. Again, thank you for joining us. We will see you again in the summary of the third quarter. Thank you, everybody.
Thank you everybody. Thank you for.
Of, uh, the financial results that, uh, we usually present.
Uh, hopefully, uh, the market will improve in the next two quarters.
Uh, especially in the fourth quarter, which is usually the strongest quarter. Uh, we're going to be there. Uh, I know that one question was asked whether or not we are cutting down costs. Uh, well, as a technology company, if we cut down costs, that means that we will be filing engineering, uh, uh, uh, engineering people and, uh, good salespeople. We don't want to do it. We're adjusting our.
Cost in the manufacturing and, uh, and the logistic. Uh, but all the rest, we keep business as usual in order to jump on the market, whenever the market will improve again. Thank you for joining us. We'll see you again in the in the in the summary of the third quarter. Thank you everybody.
Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Thank you.
The conference has now concluded.
Thank you for attending today's presentation. You may now disconnect