InMode Ltd. (INMD) Earnings Call Transcript & Summary

Okay. Good morning. Thanks, everyone, for joining us for our Global Virtual Health Care Conference here at UBS. I'm Matt Taylor, the U.S. medical supplies and devices analyst. And I'm really pleased to kick off the conference with management from InMode. We've got several members of the management team joining us on the line this morning, including Moshe Mizrahy, who's the CEO and Chairman; Yair Malca, the CFO. We've also got Shakil Lakhani, who's the President of the North American operations and Dr. Spero Theodorou, the Chief Medical Officer. So guys, thanks very much for joining us this morning. And InMode is a technology-driven aesthetics company that we have covered since its IPO, last year's successful IPO. And what really stands out about the company is its innovation, its focus on safety and generating data around its products. And it really shows in the results. They've been growing really strongly and taking market share right up until the COVID disruption, and we'll talk a lot about that during the call today. So maybe to kick things off, I'd like to give the mic to Moshe for a minute to talk a little bit about just the company, the strategy, the bigger picture and maybe some of the trends in Q1. So Moshe, do you want to start?

Yes. Yes. Thank you, Matt. Thank you very much, Matt. Myself and my team here will be able to answer any question that you guys have. And Matt, InMode was established 11 years ago. It's an Israeli based company. The team that you will see today has many years of experience in the medical aesthetics, all the way from the laser, IPL and any other technology. We got together something like 10 years ago in order to establish a new technology, which is not based on optical energy, which is more based on RF energy which will enable us, instead of doing 2-dimensional treatment like hair removal, skin rejuvenation, pigmentation, et cetera, to move directly to face and body reshaping. Reshaping, I mean to do 3-dimensional treatment. RF is a blind energy, it can go any deep we want -- any depth we want. We developed several technology, which are protected, proprietary, that enable doctors to do via minimally invasive and ablative procedure in his clinic. No need of operation, no need of hospital to do similar surgery that plastic surgeons are doing in FaceTite -- in facelift, tummy tuck and other procedures. We're doing it today, minimally invasive in the privacy of clinic without the need of anesthesia and others. This is our technology. We started -- we got FDA in 2015. And we started doing marketing and commercial activity in 2016, and we're growing very fast since then. We did $23 million a year and then $53 million a year, and then a $100 million a year. In 2018, we did -- in 2019, we did $156 million a year. And in 2000 -- early this year, we gave a guidance of close to $200 million. But unfortunately, the COVID crisis created some problem, elective surgeries were banned in most of the countries and state in the U.S. Hopefully everything will go back to normal, and we will reignite the momentum that we had. We are all waiting for that. The company is very high profitability wise. We have gross margin of 85%, 86% and net profit of 40%. And once everything will go back to normal, we will -- I believe we will be back to exercise and implement those numbers. Matt, is that enough? Or you want me to cover more?

I think that's a great start as an overview. And I think maybe just to continue on a little bit of that momentum that you're talking about. Give us a snapshot into what was happening in Q1. You had a pretty strong start in January and February and with some new product launches. Can you talk a little bit about those trends pre-COVID and some of the new products that you're going to be leaning into as you're able to restart?

Yes, Perfect. I will divide the question, your question into 2. I will ask Shakil, our President of North America to cover the situation in Q1 and Q2 in North America. And then I will give some briefing on the rest of the world. Is that okay?

That's perfect.

Shakil?

Yes. Thanks for having us, Matt, of course. So as you mentioned the product launches. Evolve, we launched in Q4, which is the first device to treat skin, muscle tone, and also fat destruction. All in one device. So that was a very successful launch. Unfortunately, due to COVID, it was slowed down in the first quarter. At the end of January, we also launched Evoke, which is our hands-free facial remodeling device, which is a very unique device. There's nothing like it in the market. We saw some very good early signs of adoption and interest on this device. In Q1, Q2 -- sorry, in Q1, so far in Q2, April was obviously not a very busy month for us as things slowed down with the COVID issue. But in terms of the first quarter, we really only had 2 full months to work on this. January is typically a slower month as we finish December. So in all reality, it was really 1.5 months, 2 months. And we had some very, very strong momentum and demand until, obviously, March and towards the latter end of February. So does that answer what you're looking for there, Matt?

Yes. No, I think -- so I mean just to point out, you grew 32% despite the disruption. So it must have been a really strong start. And I think it would be helpful, you talked about the product a little bit. The first to treat in muscle tone and fat destruction. I think investors that are following this space for a while, probably familiar with some of the public companies that have tried to do some pieces of this like Zeltiq or Cynosure. Maybe you could just spend a minute and talk about how your product is differentiated from those and how it will compete in that portion of the market?

Yes, absolutely. So...

Shakil. Yes, go ahead.

Sorry, what was that Moshe?

I wanted to say that I think let's answer Matt's question and divide it into 3 parts. I believe Spero can give the advantages of Evoke, Evolve, the hands-free from a clinical and the physician's point of view. And then maybe you can talk about the potential, and I will cover the IT, the technology and how we're going to protect that. Is that fine?

Absolutely. Spero, why don't you hop in here? And I'll jump in after.

Okay. Matt, thank you for your excellent question. So, as far as facial device is concerned, we have a large experience, as you know, and we've defined ourselves in the minimally invasive category. So when we decided to actually formally enter into the noninvasive space, we had to be very careful not to ruin the reputation we had from the minimally invasive space that we developed over time. And the reason is, as you know, noninvasive treatments tend to have lower efficacy, but it's still very popular. But that's been sort of the biggest challenge and the biggest criticism. So when we started working on our body contouring device, we were not the first ones to come out necessarily with EMS, which was very, very -- has been very popularized by other companies. But it gave us the opportunity to see what's out there, to see what close cutting had done over the years, and see exactly how our technology can fit into it. So the one thing that made a lot of sense, and just from a practical standpoint, when you're dealing with a patient, you have 3 elements that you want to work on, and one is a fat, skin and muscle, and that's just the way anatomy works. So when we decided to look at Evolve and how we're going to put these things together, we know we were experts in skin tightening. We know we have history of working on fat loss with radiofrequency. And when we approached the muscle segment, we looked at it as how does the muscle -- how can we increase performance of the muscle when we activate it? So this is why this necessarily a product that took a little longer to develop. And we were not the first to market necessarily in this category. However, we did realize that based on pro athletes and all the literature out there, if you're able to preheat the area before the muscle activates, you're able to increase something called preload, which is the ability of the muscle to actually contract and carry heavier loads, and this is very well-known in the pro athlete space. So we have the ability to do that with our radiofrequency heat. And those 3 elements we brought together and put on one platform, addressing everything. So Shak will talk a little bit about the commercial advantage to that. But as a patient, rarely does someone come in only just for muscle problems. Majority of patients, as we know, we have obesity is the largest issue and loose skin. So that way, you have every solution that's necessary for a patient that walks in through the door. As far as the facial device is concerned, we took our experience with BodyTite and FaceTite, which is the ability to heat and block the fibril-septal network, which is the area right under the skin, which is a network that holds all the fat together. And this is our foundation of how we're contracting. So we knew that we have the ability to cause what we call block heating. In other words, to heat a large area and consistently to a certain amount, to the temperature we want that we know we scientifically is proven to contract the soft tissue and hold the heat there. So we knew that from BodyTite and our minimally invasive offerings, what we did is we took that element, brought it over to noninvasive, obviously, made it less -- easier to use, noninvasive, hands-free, which was the biggest thing; and no one has ever done that before for the face, and we developed the Evoke platform, which is a facial remodeling device. And we have seen the treatments that have come in, befores and the afters, and we were pleasantly surprised to see that, yes, we could have a very, very good effect. It would take a little longer time to achieve, of course, because it's a different offering and different modality. But at the end of the day, it's a big differentiator and I believe it has a lot of disruptive qualities in the current market. So I'll let Shak take over and talk a little bit about the -- how these devices are different from what's already out there. And -- but that sums it up, our journey into the minimally invasive space, it was very, very calculated. And just like everything we do InMode, efficacy and safety are 2 cornerstones are what we do for patients. And I think that's panning out as you see.

Absolutely. Thanks, Spero.

Yes. So Matt, sorry, from a commercial standpoint, I think what's important to note and what Spero mentioned is, of course, we're able to treat everything that patients are looking for from a noninvasive perspective. More importantly, when it comes to physicians and their mindset on these devices, it really comes down to the return on investment and how they can recoup the money that they've put into the technology and allowing us, on the body platform, to have 3 different ways of treating a patient really allows them to have 3 different revenue streams based on the patient and catering to the patient. So I think from a customization standpoint, we're able to actually provide all 3 versus what you mentioned, would say, Cynosure or Zeltiq, where they were able to go after fat. And it was a very good market, and it was successful, and it still is a good market. However, they weren't able to handle everything at once. And no one really has had anything for hands-free skin tightening, which is our claim to fame, as you would call it, the skin tightening side of things. So now that we have that we're able to take all 3, put them in 1. At the same time, the face, especially the lower 1/3 of the face is a huge area that patients have wanted something done. So we obviously have our minimally invasive category. I think as we'll see post-COVID, when it comes down to surgical procedures, facelifts, tummy tucks, so on and so forth, just like we saw in 2009, 2010, these procedures with hospitalization, tend to typically drop off a little bit because they're a little higher ticket. And so this then creates 2 different niches for us, where we have our minimally invasive. If it's not good enough for noninvasive, it provides a physician to go into our minimally invasive side of things, where we can now treat the face and body with BodyTite, FaceTite, AccuTite, or if it's someone that's going after the noninvasive side of things, we're able to now provide the Evolve and the Evoke. So the idea here is to basically provide the physicians with the ammunition they need in order to actually pick and choose what they want to offer.

Yes, this is Moshe. I just want to add just to complement Shakil and Spero, and to say that we actually launched the Evolve in North America at the end of the third quarter of last year. And we did something -- on the third quarter, we did $3 million. And on the first 2 months of the first quarter of 2020, only 2 months because everybody knows that during the month of March, the world was standstill. So in the first 2 months, we did $11 million, which was not bad at all. And we saw the momentum. By the way, during the first quarter of 2020, this -- last quarter, we had the intention to launch this product in other territories, in Europe and of course, in Asia. We do have regulation for that in Europe, the CE, who already approved the 2 platforms, the Evoke and Evolve. But finally, we decided not to do it because it was not a good time during the crisis to launch new technology and new product. And hopefully, we will do it sometime on the third quarter once we see that this is a good timing. One thing -- in addition, one thing I wanted to add is that we have 3 hand pieces on the Evolve. The trim, the tight and the tone. The trim is a combination of double RF and electroporation and vacuum. The tight, which is circumferential reduction and skin tightening is bipolar RF. And the tone is EMS. The bipolar RF and also the combination treatment of the 3 are well protected by patent. And this is very important. And this will allow us to be, I would say, unique on the market. So far, nobody tried to copy us.

Got you.

Yes. Matt, just to add the last thing, I think it's really important for your investors and for everyone listening to this call. We now have the ability to control the ecosystem. So no one goes basically untreated essentially, right? So anyone who comes in, you have that group of patients who are just too scared about everything, they'll go into noninvasive. If you want something more dramatic, then they go down the chain, they go into a minimally invasive category. So controlling that ecosystem has been something that all companies have tried to do, but no one has really sort of captured it. And I think this puts us in a position, starting block position, where we can actually do that, Matt. And I think that's very, very, very important because not just for doctors, for revenue stream capture, but positioning a full solution for customers to be able to do that, it gives us a very, very wide net, and to do it effectively, of course. So I just wanted to put that out there, Matt.

Yes.

Yes. Just I told you.

Yes. This is a great overview of this. And it sounds like an awesome offering with all the different options and the different modalities. I guess the last thing I'll ask about this is there's probably not been enough time to do comparative studies. But anecdotally, can you speak to the kind of results or the efficacy that you've seen in some of the early testing and maybe how that would compare to something else on the market?

Right. So that's a very good question. Traditionally, noninvasive modalities, Matt, usually have what we say, a 25% result. So 25% result from before you started as it relates to a before and after result, right? The human eye cannot really discern a 10% difference on the human body or anything visually, it's very, very difficult. So you're essentially talking about 15% results. So it's very, very hard. That's always been the challenge as far as noninvasive modalities are concerned. We know for a fact, or studies have been showing that -- ongoing, we were very pleasantly surprised because not only were our results -- our foundation was starting off at that number, but the range and as we get more comfortable and more into the science and see which patients or candidates -- right now, we're seeing results in 50%, 60% differences, and in some cases, equivalent results with actually minimally invasive surgery. And that's the shocking part. It is related, I would say -- I'd venture to say that it's probably related directly to the amount of treatments necessary. And this is very important. When you look at a competitor who's cooling fat, right? We know from their studies that after the first treatment what happens is that the efficacy of that platform goes down because their patients don't respond as well. And that studies that they put out. In our case, the more you treat -- now we recommend, for example, for the facial remodeling device. The more we treat, it's 3 to 6 treatments, but the more you do it, the more a result you get, the more tightening you get, the more fat loss you get. And we know from radio frequency that the results continue up to one year. It's not just a 3-month thing and we're done. So those are the early results we're seeing. We're actually very surprised and pleasantly surprised. But I think one of the biggest advantages here if we know that the more we treat with our device and the bigger result we get, if we know there's no monetary penalty on the doctor to do that -- so for example, if a patient comes in and says, I'm not happy, I don't see a result. And it doesn't cost the doctor to do more, he's like, no problem, there's no -- and I'll let Shak and Moshe talk about this, but there's no disposable on devices. Then immediately, it takes that out of the equation, and the doctor will say, no problem, have a couple more treatments. So it really puts the physician in a very advantageous position as well as the patient for results being happy. So as far as how we compare, we're comparing really well, if not better. But aside from the fact, which is really simple, we can tighten skin. The other modalities out there really can't. So that immediately sets us apart. Does that answer your question, Matt? I'm a little long-winded on it, but...

No, it does.

A lot of stuff that I want to disclose. But we're publishing everything, and we don't want to mess with what we're putting out there on the actual publications yet.

Yes. Yes. Well, good. Well, okay. Let's transition to some other topics as I think we spent a good amount of time and covered a lot of great points on the new products. The next thing I wanted to ask about, everybody is trying to understand what 2020 and 2021 are going to look like. And I would just love to get some feedback from you as these states and some other areas are starting to reopen. Maybe you could talk about some of the green shoots you're seeing with regards to procedures restarting. And what your expectation would be for this transition period over the next couple of months as practices get back to normal?

Yes, Matt. So it's Shak here. So as we've seen, with different states, we've slowly released the sales forces very safely, of course. We're looking out for them, their families and also for the physicians, of course. But we have seen in certain states where things have been reopening. We've actually seen, as we've mentioned before, but -- and then it kind of confirms at least early on, the pent-up demand theory. So we have -- as I'm in Texas here and we've seen everyone from hair salons that are now slowly opening back up, med spa, places are actually having that higher level of demand that we expected. From some of our current customers, they're booked out. We have a couple of people in areas, even rural areas, but areas that have opened up that actually are booked through till September. So there -- a lot of the physicians, as I've mentioned in the past, have been doing virtual consults, and they have been booking up their calendars, but now we can confirm that it is indeed the case. From a sales standpoint, we've actually started slowly seeing some momentum carry on as things have slowly started reopening. So last week was actually a pretty good week in the sense that we saw that momentum come back to what it once was. But obviously, not at that degree as other larger states like New York, California, slowly start to reopen, I'm sure we'll see things kind of pick up from there. But everything that we've seen so far has been in line with the pent-up demand theory that we've hoped and thought would be the case. Very similar to what we saw in 2009, 2010. So that's definitely encouraging on our end.

Matt, this is Moshe. Let me give you, in addition to what Shakil said, some general overview, okay, on '20 and '21. Well, our guidance for 2020 was in between $190 million to $198 million worldwide. We had some feeling that if everything will be okay, we will be close to $200 million, which is about $45 million to $50 million above 2019, similar growth to -- in between 2018 to 2019. The first quarter and the first 2 months went very well. And as we said in the earning call, the first 2 months of 2020 was higher than the entire quarter of 2019. We did $30.8 million. $30 million in the first quarter of 2019, and we did $40.4 million in the first quarter of 2020. The second quarter of 2019 was $38.8 million. So basically, I would say that as we said in the earning call, we actually lost the quarter. We lost the month of March and we probably lost the month of April, a little bit of May. So altogether, if you calculate that, so far, we lost one quarter. If everything will be -- will go from now, will start to get normal. And the month of June, we will see some improvement. And then on Q3 and Q4, I will not say that we'll go back to the original budget or to the original plan, but if we see that, that also will be improved, I believe that what we stated in the earning call that we will not be much less than last year on the total of 2020 is accurate assumption. Q3 and Q4, we are optimistic. We believe that those 3 (sic) [ 4 ] quarters will be okay. We see some sign in Asia, in China. We started getting orders from China. We started getting orders from Korea. We started getting orders from Germany, also India and Australia. India is not that good because they're still on the curfew, but Australia just opened and we got some orders as well as from Russia and others. So we start seeing some, I would say -- but some starting point in other territories, and that's encouraging. Also, I believe that as Spero and Shak said that our portfolio of the minimally invasive and hands-free, will help doctors to revive, to reopen their businesses because hands-free, you maintain social distancing, it's more private. Doctor will love it. And so I believe that 2020 will be a little bit less than 2019. As far as 2021, I'm not saying here that we will go to the original plan, which was getting into the $250 million level. But I believe that since our portfolio is growing, and R&D did not stop because of the COVID. And all the new product that we will specify later on today, will be launched. I believe that we will see a growth from the $200 million that we planned that was the original plan for 2020.

Got you. Okay. Great. And I wanted to cover something you talked about on the call, too, which is that you've really maintained your momentum in hiring some reps, you kept R&D going, as you mentioned. So you've continued to invest through this disruption. I was hoping you could spend just a minute talking about that and maybe how that's different from some of the competition.

Okay. I mean I will start and then Shakil will give you some of what we did in North America. Well, you know we have very good financial resources, very good financial situation. Everybody knows that we have $201 million in the bank. So we -- and actually, we believe that every crisis will have an end. And therefore, we decided that we are not downsizing the organization. We are not cutting. We're not firing people. We do not send them just because it's tough. We would like to keep them. Actually, we are working like a family, really. And I think that the team will appreciate that once everything will go back to normal, appreciate and honor it. Not just that, Shakil will tell you that we continue to hire people, not just in North America, also in other parts of the world. And we used the time in North America and in the rest of the world. Shakil, why don't you give briefing what we did in North America, and I will continue from there?

Yes, absolutely. So Matt, I'll be quick with this. But we definitely did -- we picked up -- so about 85% of the industry either laid off or furloughed at least 30% to 50% minimum of their workforce. We, on the other end, like Moshe mentioned, we took the family approach. I can tell you now, as we mentioned on the earnings call, but some of the trainings that we've had, virtual training, things like that. We already had a pretty good sales force, but we do feel pretty good. I mean it's an unfortunate thing with the whole COVID situation. However, because we were just -- the last 3 years, we've just been go, go, go as part of building the momentum, of course. And this actually gives us a bit of a quiet period, which I actually think we needed to get our reps prepped to the point where they were -- I mean even deadlier assassins, if you could call them that. But they were able to basically sharpen their swords. And this has been that period of time. They were dying to get out there. As they've gotten out there, like I said, the last week, a few weeks, I should say, have been extremely encouraging, but they were just -- it was a good period of time where we were able to get them trained up, things that we didn't have time to do in the past because they're so busy doing. And now we were able to do that and basically unleash what we've kind of worked on training these guys on. So it is encouraging. Moshe, you can take over from there.

Moshe, are you on mute?

Matt, we are a very flexible company. And very lean and mean, I would say. I'll just -- I'm sure you know the numbers. We have a quarterly G&A of $1.5 million. Cutera, our competitors have $6.5 million. And yesterday, I watched the results of Venus, which is smaller than us, and they have $14.5 million G&A every quarter. So these are heavy companies. These are unflexed -- they don't have the flexibility that we have. So once we realized that we were in the crisis, instead of going into a panic mode, we decided that we will take the time to build the infrastructure for the next level of the company. And we directed R&D resources into a new product that we thought will be excellent product of -- will fit the post-COVID. We continue to develop product for the hand-free devices and also for the minimally invasive. And I cannot specify right now because this is a competitive information. But everybody will realize that we are -- in the second, third and the first -- second, fourth -- in the third and fourth quarter of 2020 and the first quarter of 2021, we will come up with at least 3 new platforms and several more indications, and hand pieces for existing products. We did a full training and webinar worldwide, and I was surprised to see how many doctors and how many people from our team have joined that to get acquainted with all the new protocols and everything. We finalized building a small organization in France to go direct there. We finalized the setup of another manufacturing facility here in Israel to make sure that all of our supply chain, logistic and manufacturing will have the capacity for the next level of this company. So those 3 months were -- this is -- it's not just we plan to do it, but all of a sudden, we have the time because the level of sales went down. So we took the time, and we used it right. And instead of downsizing, we grew the company. We enhanced the cooperation. We enhanced InMode. and I think we will see the results once everything will go back to normal.

Got you. Got you. Okay. You covered a little bit on the pipeline there as a sneak peek. I guess I wanted to ask a question you've referenced a couple of times in your answers, but I think it's an important point. As customers go back to get treatments, there's going to be a trend towards outpatient or office-based procedures, probably more minimally invasive and noninvasive procedures just with the risks around going into facilities. And I guess I was just hoping you could talk a little bit about how your portfolio is leaning into that shift and how you're going to be able to use that as an advantage?

Spero, do you want to start?

Sure. Matt, thank you for that question. I don't think there's a single company that's, right now, in our space that's better positioned to take advantage of the current post-COVID recovery phase for practices. We are basing that statement -- and I know this sounds pretty intense, but based on our '08, '09 experience, patients did not stop demanding aesthetic procedures. But what they did do is switch to minimally invasive and noninvasive. And those are different price points certainly, but practices that adopted that back in the recession '08, '09 did very, very well. So learning from that period of time and being positioned -- we got ask that question a lot on the roadshow, being positioned to have these types of office-based procedures is a huge deal because our average minimally invasive procedure has a 48-hour downtime, so you can do it on a Friday, go back to work on Monday, and has a long-term result. So that is very, very powerful. And now with a noninvasive such that, for example, our facial platform, Evoke, it respects social distancing as well. So you have a patient who can come in, pay ahead of time online. Patient comes in, nurse puts a helmet on, essentially, it's under 2 minutes, has the procedure done and the nurse can remove it afterwards. So we're talking about a contact with staff and patients less than a total of 5 to 6 minutes, which sort of respects the social distancing aspect. So the combination of those 2 things and the help basically what the U.S. government did is educate everyone on ventilation and ventilators. So everyone knows what that means. Everyone knows that it's a bad thing. Everyone knows that if you get on one, you have a 20% to 30% chance of survival. So if people had anxiety regarding general anesthesia, that just got compounded to a dramatic point where now everyone is then asking for local anesthesia or office-based, away from the hospitals. And that trend is perfect for a company like us because we're waiting for them and we positioned all our technology in that way. Now with the noninvasive offering. That is feeding the minimally invasive platforms we have. So that's how the doctors are certainly -- we're seeing the buying patterns right now are saying, "Okay, what is the solution I can offer in the recovery phase to my patients?" So they're buying together, and Shak can talk a little bit about this, about the different bundles. And how that reflects their understanding of -- they know they have to be in a minimally invasive space, and they know that major surgery is not going to necessarily happen to a large volume for this year, absolutely not. Shak?

Yes. So Matt, what we've seen early on with this is there have been physicians that have actually voluntarily come to us saying that they need a minimally invasive offering if they're not offering that. But also on the noninvasive side, they've actually wanted to have both of those offerings. So what we've done is from at least a sales standpoint and marketing standpoint, we've actually come up with some packages and some bundled pricing for these physicians who want to add both of them, but they're the -- at least what we've been told and what we've heard from multiple physicians is that the -- they're all well aware that the surgical type procedures or hospital-based procedures will be down for quite some time. And so in order for them to keep practicing and keep revenue going in their clinics, they will need to have some sort of different offering, which has been encouraging for us.

Right. Right. Okay. Well, we're almost out of time. I want to see if I can get one last one in here on profitability. We've talked a little bit about the profitability of the organization and how that stands out. I mean your contract manufacturing allows you to keep gross margins in the mid-80s even in this period of disruption. Maybe you could just speak to the outlook for profitability longer term. And I think what investors would be interested to hear is how you have confidence that you'll be able to maintain that kind of high profitability over the long run?

Okay. This is Moshe. There are 3 reasons why our profitability is higher than the peers. I would say that the first one, of course, is the IP and the uniqueness of the product, which allows you to charge and to get better prices. I'll give you an example. We sell -- we are selling in North America, a system for $120,000 to $130,000 a platform on average, okay? A typical laser, which costs small to manufacture today in North America, is being sold for, I would say, $70,000 on average, maybe more or less a few thousand dollars. Why is that? Laser today is not protected. Everybody can make lasers. There's no patent. They are all expired. All the patents for their laser work expired already. They are more than 20 years old. Laser was invented in the late '70s. There are many companies today from Asia, 7 Korean and some others who got FDA clearances to use laser for hair removals, skin rejuvenation, pigmentation, et cetera. We have invented the new technology. Basically, a bipolar RF, which allow us minimally invasive, noninvasive, ablative, hand-free to actually design and manufacture our product and platforms, which we can sell worldwide in those kind of prices, direct or indirect. Therefore, that's one of the reason why our gross margin is higher. Second, I would say that we have the expertise and the engineering know-how how to design to cost. And I want to emphasize on that. That's not something that many companies know how to do. From the drawing board, we are calculating through special formulas that we have, what will be the gross margin of the product that we are now starting to develop. And we're selecting components accordingly, and we're doing the subassembly accordingly. And we put together the entire manufacturing line, the assembly line, the testing, the service, the cost of service, the cost of shipping, all together to make sure that on a given price that we intend to sell this product, we will have 85% to 86% gross margin. Otherwise, we don't design this product. Third, to manufacture or to produce RF energy costs less than optical energy like laser and IPL. On a 20 joules per centimeter square, this is amount of energy generated by laser will cost double than if we generate 20 joules per centimeter square of RF energy. And the last point is we manufacture in Israel. We have special manufacturing facilities in Israel that specializes in medical equipment. All FDA, CE approved. And cost of manufacturing in Israel, I will not say cheap, it's not China, but taking into consideration the regulation and all the compliance that we have to comply with, it's less than in the United States. When you put all those ingredients together, this is 85% to 87% gross margin. Even when we went down last quarter -- in the first quarter, and we worked only 2 months, somebody will say, "Hey, you don't have the economies of scale." We did 85% because we do have the economies of scale, we're very lean and mean as far as overheads on those prices. And we will maintain that. We will maintain that. Unless we have 85% or 86% gross margin, we don't have money to invest in R&D. And we want to invest in R&D to come up with 2 to 3 platforms every year. More than together all of the industry. And we don't have money to invest in regulation. We don't have money to invest in marketing and sales. We don't have enough money to compensate our salespeople and attract them to work for us. And at the end, we want to be 40% net profit. That's the goal, and that's what we maintain just up until last year before the crisis. So this is the philosophy and the DNA of this company.

Got you. Moshe, that was a great overview. And I want to thank the whole team for joining us. It's been a good discussion. I think we could talk all day about the company. But I think, unfortunately, we're out of time. So I just want to, again, say thanks to the whole team for joining. It's great to get all your perspectives and for kicking off the med tech track here of the virtual conference. I hope you have a good rest of the conference with us.

Thank you very much, Matt. Thank you.

Thank you, Matt.

Thank you, Matt. I appreciate it.

Thanks, guys. Take care.