Inmode – INMD

nMode Ltd. (INMD) CEO Moshe Mizrahy on Q4 2021 Results – Earnings Call Transcript


Best quotes

Once again, we have the pleasure of announcing a record quarter, with revenue of $110.5 million and $357.6 million for full year. An increase of 47% and 73% compared to the same period last year, crossing the $100 million quarterly revenue marked a symbolic and meaningful achievement for our company.
We continue to achieve strong positive profitable growth. Net income for the quarter was a GAAP basis was $52.7 million and $55.2 million on a non-GAAP basis. In the full year of 2021 net income reached $165 million on a GAAP basis, and $176.3 million on a non-GAAP basis. As a results of our strategy to focus on selling more system globally, sales of capital equipment represent 89% of our total revenue in the fourth quarter.
Sales from consumable and services increased significantly and reached record volume every quarter. These sale accounted for 11% of total in the fourth quarter and in the full year of 2021. By launching new platforms and innovative modalities and growing our install base in the U.S. and globally, we expect consistent growth in consumable revenue will become a more significant part of our revenue mix.

I would like to highlight the ongoing growth from our minimally invasive and ablative technologies, which now account for 73% of our revenue compared with 65% last year. Hand-free devices generated 17% of our revenue and non-invasive RF and laser platforms were present the remaining 10% The product line mix for the full year was 72% for minimally invasive, 20% for hand-free and 8% for non-invasive RF and laser platforms.

Looking in the international side of the business, fourth quarter sales outside the U.S. accounted for $36.3 million, a 69% increase compared to the same quarter last year. Full year results reached $120.3 million, a 112% increase compared to 2020. These figures represent 34% of our total revenue of all 2021 and 33% of our total revenue for the fourth quarter. InMode currently operates in 71 countries, having added 17 countries more in 2021. We also expanded our existing operation in Italy by establishing a subsidiary there. We see most of the growth coming from region where we are already involved, yet there was opportunity in the new territories.

Furthermore, despite facing serious global supply chain obstacle in 2021, we successfully delivered every system within 10 days of receiving an order. We would we would not have done that without our hardworking and dedicated employees and partners.

Sales from capital equipment were the main contributor to our quarterly revenues with $98.6 million in Q4 and $318.2 million for all of 2021 with an install base of 11,600 units.

Despite new COVID variants causing another surge across North America, physician offices in the fourth quarter were the busiest they’ve been and all of 2021. Demand for minimally invasive Technologies has been steadily increasing, supporting our growth in the U.S. and globally.

With the launch of EmpowerRF, we’ve seen significant interest by physicians in the women’s health space. Currently, our focus is on North America. However, we will gradually expand to the rest of the world. We plan to continue hiring new sales staff for the North American market, which will increase top-line growth as proven in previous years.

The geographical revenue mix in Q4 was 67% in the U.S. and 33% internationally, compared to 71% and 29% for the same quarter in 2020, respectively. International Sales increased year-over-year by 69%.

The company had cash and cash equivalents marketable securities and deposits of $415.9 million. On the cash flow front, the company generated $52.9 million from operating activities for the fourth quarter, and $174.9 million for all of 2021.

that right now there are some countries which are totally closed. And we have some slowdown for example, in China. I’m sure you know that they have adopted zero cases program. They don’t allow people to travel even within their territory. They don’t allow people to travel between cities. So our salespeople in China right now are very limited in the way they can do business. They try to overcome it.

Also in Europe, there are countries under lockdown like Netherlands and Austria, where hopefully soon they will get out of it. I believe that sometime in February or maybe early March, business will go back to normal.

And I believe that in the first quarter, we will do less than what we did on the fourth quarter, hopefully not much less. I would say that 10% of the countries where we sell will be some effect. Other than that, we need to wait and see what will happen in the next few weeks.

Well, we managed very well the situation in 2021, as we go through the supply chain. I’m sure you know that — some we have — we have established a red team in Israel, that every time we had a problem with component and with subassembly, we managed to overcome it because we have more than one suppliers per — each component and each subassembly.
Things are not getting better. That’s something that I can tell you right away. The supply chain is not improving. I don’t say it will — it’s getting worse. But as we see now the beginning of 2022, we still see some difficulties and we foresee that during 2022 it will continue.
I can give you an example of logistic. A container formation to North America used to cost $3,500. Now the cost is $12,000. But we managed to overcome it by doing some kind of special shipping in the low cost. I believe we will overcome the supply chain like we did in 2021. And we deliver everything within a week or 10 days of every order. We do our best. But I know from some of our competitors and some of other companies in the medical field that they are giving now delivery time to customers of 6 or 9 months. We did not do that. But yeah, we are flexible. And I would say that hopefully it will not affect us.

I can tell you that in the last quarter, we sold 132,000 disposables compared to the third quarter where we sold only 94,000. So this is growing.
But as long as we continue to install or to enlarge our install base, and by the way in the fourth quarter, we sold more than 1,300 system. So it went up from 10% to 11%. With the install base of 11,600 system, that’s what we have right now on the market we have something like I would say close to more than 500,000 disposable every year. And don’t forget not all the system that we sell need the disposable. I would say that a little bit more than 50% or 55%, maybe 60% are using disposable and go all the way to the subdermal set.

So in the future, once the install base will get, I would say to 20,000 or 25,000, I assume that the disposable will grow to a neighborhood of I would say 14%-15% of the total revenue.
But again, I would like to say it again, we’re not always though and razor blade company. We do not sell the system for less or do not give the system for free, just to charge high price for disposable. We know that some companies in the medical aesthetic did it in the past, and they failed. And therefore, we charge for the system. And we price the disposable in a reasonable price in order to encourage doctors to use more and more and to have more treatment. I think this is the right approach and the right philosophy. And this is basically our strategy.

I understand there’s a tax rate headwind, but it does seem to imply that there’s an operating margin decline in 2021 — or sorry, from 2021, if my math is correct. So is there any reason to expect that, or is it just being conservative on your part?

And so this year, we expect to have a slightly higher operating expenses. But overall, we’re looking at 48% operating margin, it’s still quite remarkable. And add into that around, 2022 going to be the first year, as you know that we start paying taxes after a 10 years break. And that would come out to be around 10% we estimated at this point, at least. And as I mentioned, we always tend to be conservative when we can.

Well, Mike, we did. So far, we did close to 1.5 million shares that we bought back in the last, I would say less than a year. We still have a way to go. The Board of Directors give us the permission to continue to buyback shares, and we will continue. I’m not saying that we will spend $200 million for that, but we’ll do it. We’ll do it on a daily basis.
Yes, you’re right. We have more than $400 million in cash, close to $420 million in cash. We are exploring some opportunities for M&A. But we did not find anything that will fit our portfolio yet. One thing I can tell you, as we said before, we will not buy a laser company because laser is becoming a commodity in the medical aesthetic. We need to find something that will complement our portfolio, either in technology, marketing, sales network, something that will two plus two will equal five. But in nowadays it is very difficult to find something within a reasonable price.

But yet, we have a very robust R&D pipeline close to 15 project. And we’re releasing two project every year. So the organic growth will continue to be the most I would say growth engine for InMode, at least in the next two years.

Well, the Hands-free, when we came up with the Hands-free to the market, we knew that this is not going to be more than 20% of our business. Our main category is minimally invasive and ablative where we can take operations from the surgical, from the full surgery and the full anesthesia and bring it to the doctor office. This is exactly what the Empower is doing. And the Empower is minimally invasive because you basic penetrate the skin and you do some fractional RF as well.
And we will continue to develop product that will have on one hand, will be more surgical, the non-surgical and on the other end will have some disposable as well. So the Empower is a complementary technology for us. It is not going to be 50% of our business.

This is not the main category for us. And it is good because it’s a very competitive market with very low gross margin, with overcapacity with price per unit, which is much lower than what we can charge without any IP protection. Laser are invented 40 something years ago. There was no IP protection anymore. And therefore, we try to concentrate on where we have competitive advantage. And this is basically the surgical part of our business.
And I believe that that we’re very happy with the breakdown of the category. More than 70% are in the area where we can protect the technology and get nice prices for the system. 20% will be there Hands-free. And I hope it will continue we’re going to bring to the market, second generation of the Hands-free devices. And the laser and the regular RF the non-invasive RF will continue to be between 8% to 10% of our business. That’s kind of breakdown will be continue in the future.

And hopefully in 2022, we will bring second generation for the Evoke for the face Hands-free as well, just to maintain the competitive advantage.


Docs do not like testing click fees or per use fees. I think the model is much as investors want to see more recurring revenue. I totally get the model of charging a full market price for the system itself and lower price for the consumable, that’s surely what those doctors appreciate.


Well, I assume you talk about Thermage, which is with Solta. They just announced that they’re going public, and they released their prospectus. And in their prospectus, they have three quarters something like I don’t know, 75%, disposable and 25% platforms. But don’t forget Thermage is a 25 years old company. They’re on the market for long time. We are on the market only five or six years, 20% of the time of the 25 years that they are.

So they have a bigger install base, and they sell less platforms and they sell more consumable. I think that one day, we will sell more consumable and it will be much higher than 10%. But it’s take time to build the install base worldwide. Once the install base will be much larger than what we have today. And I assume Thermage has much more than 10,000 system worldwide installed, especially in Asia, where they’re very strong. 70% of the businesses in Asia. I believe that we will also see some that our disposable proportion of the total revenue will be higher.
But right now, we’re still young company. And as a young company with only 11,000 system installed, the revenue coming from the disposable is growing, and it’s growing. It’s went from 10% to 11%. But don’t expect that to go to 20% over three quarters. It will it will go slowly, but it will go nicely. We see more and more treatments are being done. We see more and more disposable are being bought from us. But in the same time, we see a lot of new platforms that we install in the market. And the new doctors need some time before they start doing 10 cases per week.
So this is a learning curve. We are all wide on the learning curve. And one day, we will be not — I don’t want to say like Solta time and like Thermage, but the disposable will be a bigger part of our revenue.