InMode Ltd. (NASDAQ:INMD) Q3 2023 Earnings Call Transcript
InMode Ltd. (NASDAQ:INMD) Q3 2023 Earnings Call Transcript November 2, 2023
InMode Ltd. beats earnings expectations. Reported EPS is $0.61, expectations were $0.6.
Operator: Good day, and welcome to the InMode Third Quarter 2023 Earnings Results Conference Call. [Operator instructions] Please note today’s event is being recorded. I'd now like to turn the conference over to Miri Segal of MS-IR. Please go ahead.
Miri Segal: Thank you, operator, and to everyone for joining us today. Welcome to InMode's third quarter 2023 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 Investor Relations section of the company's website. Changes in business, competitive, technological, regulatory, and other factors could cause actual results to differ materially from those expressed by the forward-looking statements made today. Our historical results are not necessarily indicative of future performance.
As such, we can give no assurance as to the accuracy of our forward-looking statements and assume no obligation to update them, except as required by law. With that, I'd like to pass the call over to Moshe Mizrahy, Chairman and CEO. Moshe, please go ahead.
Moshe Mizrahy: Thank you, Miri, and thank to everyone for joining us. With me today are Dr. Michael Kreindel, our Co-Founder and Chief Technology Officer; Yair Malca, our Chief Financial Officer; Shakil Lakhani, our President in North America; Dr. Spero Theodorou, our Chief Medical Officer; and Rafael Lickerman, our VP of Finance. Following the prepared remarks, we will all be available to answer your question. The third quarter was the first time that we saw a slowdown and experienced normal seasonality that is common in the medical device industry in general and specifically in the static space. We ended Q3 with revenue of $123.1 million, a slight increase of 2% compared to the third quarter of 2022. Until the third quarter, InMode has been in an accelerator growth rate as we establish our presence in the US and globally.
Furthermore, the last three years of the COVID pandemic led to abnormal environment in the aesthetic space, resulting in pent-up demand and different aesthetic treatment patterns. Pre-pandemic, summertime hasn't been a popular time for aesthetic treatment due to travel and the requirement to avoid sun post-treatment. This summer, patients and physicians in the US and in Europe returned to normal seasonality cycle and this trend was reflected in our Q3 financial results. In addition, record interest rate impacted the financing environment of new leasing agreement in our industry. Salespeople often say time-killed deals, and as the credit clearance process takes longer, less platforms were sold in the United States. However, despite these macro challenges, we were pleased to see that demand for InMode treatment has not been slowed down and remain high.
Patent and gold standard technology and innovation are InMode key differentiator. We constantly improve and upgrade our technology. We remain committed to developing new minimally invasive technology and platforms, as well as upgrading our existing platforms. In addition, we will aggressively enhance and protect our IP and patent. This will ensure our long-term position as leader in the industry and will enable us to benefit and become stronger following the current challenges in the market. Before I turn the call over to Shakil, I would like to reiterate our message regarding the conflict in Israel. As we said in our press release, our employees are safe and together with their management team in Israel and in the United States. We are all as committed as we have always been to the success of this company.
InMode is committed supporting all customers, distributors, employees, and salespeople worldwide. We prioritize the safety and the well-being of our employees and will continue to do so as we execute our strategy. We don't anticipate any interruption to production. Our inventory levels globally and in Israel are sufficient and include component and sub-assembly for the next three quarters. As a result, we expect all platforms and consumables will be delivered on time and will meet the highest standard. In addition, InMode take all required measures to ensure continuous customer support and exceptional service, we are all as committed as we have ever been to the company success. Now I would like to turn the call over to Shakil Lakhani, our President in North America.
Shakil?
Shakil Lakhani: Thanks, Moshe and everyone for joining us. InMode's third quarter was challenging for North America. Despite the headwinds of lower platform sales in North America in the third quarter, we are encouraged by the strength in consumable sales and view this year-over-year increase as an indication of continued demand for InMode's treatments. Revenue from consumables and service accounted for 15% of total Q3 revenues and grew 28% year-over-year. We are pleased with the successful launch of Envision, our non-surgical ophthalmic platform in Q3. It is progressing well in North America and is gaining traction among leading optometrists and ophthalmologists. Additionally, at the very end of Q3, we successfully launched [Define], the new and improved version of our hands-free technology for the face.
We expect early revenues to be in Q4. As always, I'd like to thank our entire North American team and all employees everywhere for their continued hard work during these challenging times. I will now turn the call over to Yair for a review of the financial results in more detail. Yair?
Yair Malca: Thanks, Shakil and hello everyone. Thanks again for joining us. InMode generated revenue of $123.1 million in the third quarter of 2023, representing a 2% year-over-year increase with a gross margin of 84% on a GAAP basis within the company model of 83% to 85%. Third quarter sales outside of the U.S. accounted for $44.9 million, or 36% of sales, compared to $39.8 million, or 33% in Q3 of last year. We continue to see growth coming from different regions around the world, and in Q3, sales from Asia hit a new record. To support our operations and growth, InMode now operates in a total of 93 countries with a sales team of more than 267 direct reps and 82 distributors worldwide. Capital equipment in the third quarter represented 85$% of total revenue, while consumer business service revenues accounted for the remaining 15%.
Sales and marketing expenses increased to $50.8 million in the third quarter, compared to $43.1 million in the same period last year. This increase is attributed to the addition of new sales representatives as well as investment in direct-to-consumer advertising campaigns and hosting in-person events. The share-based compensation accounted for $6.6 million in the third quarter of 2023, a decrease compared to $7.9 million in the third quarter of 2022. GAAP operating expenses in the third quarter were $56.6 million, a 16% increase year-over-year. On a non- GAAP basis, operating expenses were $50.6 million in this quarter, compared to a total of $41.4 million in the same quarter of 2022, representing a 22% increase. GAAP operating margin for the third quarter of 2023 was 38%, compared to operating margin of 44% in the third quarter of 2022.
Non-GAAP operating margin for the third quarter of 2023 was 43%, compared to 51%, for the third quarter of 2022. GAAP diluted earnings per share for the third quarter were $0.54 compared to $0.58 per diluted share in Q3 of 2022. Non-GAAP diluted earnings per share for this quarter were $0.61, compared to $0.66 per diluted share in the third quarter of 2022. Once again, we ended the quarter with a strong balance sheet. As of September 30th, 2023, the company had cash and cash equivalents, marketable securities, and deposits of $675.8 million. Before I turn the call back to Moshe to take your questions, I'd like to reiterate our revised guidance for 2023. Revenue between $500 million and $510 million, Non-GAAP gross margin between 83% and 85%, Non-GAAP income from operations between $220 million and $225 million, Non-GAAP earnings per diluted share between $2.53 and $2.57.
I will now turn over the call back to Moshe.
Moshe Mizrahy: Thank you, Yair. Thank you, Shakil. Operator, we now can get Q&A.
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