InMode Ltd. (INMD) Earnings Call Transcript & Summary

Good morning, and welcome to the InMode Limited Second Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Miri Segal of MS-IR. Please go ahead.

Thank you, operator, and everyone, for joining us today. Welcome to InMode's Second Quarter 2021 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 direct yourself to the 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 these 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. Today, with us are Moshe Mizrahy, InMode's Chairman of the Board and CEO, who will begin the call with a business update. Then he will turn the call over to Shakil Lakhani, InMode's President of North America to discuss our North American operations. Finally, Yair Malca, our CFO, will discuss the financials of the company. With that, I'd like to pass the call to Moshe Mizrahy. Moshe, please go ahead.

Thank you, Miri, and thank you, everyone, for joining our second quarter 2021 earnings call. With me today are Dr. Michael Kreindel, our Co-Founder and Chief Technology Officer; Mr. Yair Malca, our CFO; Mr. Shakil Lakhani, our President of North America; Dr. Spero Theodorou, our Chief Medical Officer; and Rafael Lickerman, our VP, Finance. Following our presentation, we will all be available for Q&A. For the second quarter of 2021, InMode is happy to report record revenue of $87.3 million, an increase of 184% compared to the second quarter of 2020. Also this quarter, net income on a GAAP basis reached $40.9 million and $43.9 million on a non-GAAP basis. During Q2 2021, sales of capital equipment accounted for 89% of our total revenue. The remaining 11% was derived for consumable and services, representing $9.5 million of a total revenue, a 22% increase compared to last year. Quarter-by-quarter, over the last -- of the past year, InMode has consistently posted sales of a record numbers of consumable. From Q2 2020 until today, sales of consumable have more than doubled. This indicate that physician are successfully adopting our system with a greater frequency, paving the way for this segment to continue even more to contribute to our revenue. This ongoing demand reflect how the minimally invasive aesthetic surgical space is growing. 71% of our revenue was derived for minimally invasive and ablative procedures, 22% from our hand free devices and 7% from our traditional laser and noninvasive RF platform. The U.S. continued to be the biggest contributor to our top line, with the total sales reaching $56.4 million compared to $24.1 million in the same quarter last year. As part of our growth strategy and following our success in the United States market, we keep expanding globally. We continue to expand our sales network in all geographic market. This quarter, Asia and Europe were top contributors. Total sales outside U.S. were $30.9 million, more than triple what we reported during the same period last year. This represents 35% of our total revenue compared with 22% of our total revenue in Q2 2020. Currently, we operate in 68 countries, and we expect this numbers to grow. We generally manage 12 to 15 regulatory project globally at any given time. Some of these project go behind aesthetic and are medically oriented. Presently, InMode R&D pipeline is comprised of dozen of project in our traditional area of activity in aesthetic surgery as well as in gynecology, ophthalmology and ENT and more. Our newest platforms, the Empower will be launched in August 15. This platforms is expected to become the gold standard in women health and wellness. The Empower will expand our business and mark a major step for InMode into the gynecology market. Based on our successful performance in the first half of 2021, we have updated our full year 2021 revenue guidance and expect total revenue to be between $305 million to $315 million. In addition, we intend to maintain a non-GAAP gross margin of 84% to 86% for this year. We are continuing to make important progress in our ESG related activity. Today, we will be publishing our business and commercial ethics, interaction with health care professional guidelines and marketing ethics. All will be posted on our website. Finally, we continue to support the InMode workforce as we continue to comply with all local and regional health and safety regulation to protect the welfare of our employees and customers. Now I would like to turn your attention to Shakil, our President in North America. Shakil?

Thank you, Moshe, and hello, everyone. Once again, we delivered a record performance in the second quarter with exciting developments on several fronts. Strong sales from capital equipment drove revenue for the quarter to $87.3 million. Consumables and services continued their consistent upward trajectory. In light of lockdown limitations being lifted, North American physicians returned to some semblance of normal capacity and were able to treat more patients at a given time. This had a direct impact on consumer demand and ultimately, more patients returned to physician offices seeking our treatments. We continue to see physicians adopting our platforms frequently and successfully. Moreover, pent-up consumer demand and industry trends in the aesthetic space enabled InMode to offset much of the market's postpandemic deficit. As these demands and trends materialize and strengthen, consumers are seeking previously delayed treatments. During this time, our sales force has exceeded expectations, and we played a major role in transitioning the company to a new normal. We plan to reinforce our growth by hosting a number of in-person events throughout the year. These events provide an opportunity to educate the medical and wellness community on the variety of InMode's minimally invasive and hands-free applications. As Moshe mentioned, we'll be launching our women's health and wellness platform Empower, which we're confident will be a one of a kind technology in the market. Finally, we commend our North American team for the continued impressive performance, and we appreciate their loyalty and dedication and hard work. Their efforts were pivotal in helping us achieve another strong quarter. Now I'd like to hand over the call to Yair for a review of the financial results. Yair?

Thanks, Shakil. Good day, everyone. Total revenue in the second quarter of 2021 increased 184% year-over-year to $87.3 million, with a gross margin of 85% on a GAAP basis. The increase in revenues was primarily due to the impact of the global COVID-19 pandemic, with significantly reduced economic activity and caused shutdowns in the U.S. during Q2 of 2020. Highlighting significant growth in each of our segments, year-over-year, minimally invasive and subdermal ablative technologies grew 247%, hands-free platforms increased by 64% and laser and noninvasive grew 397%. In addition, international sales continued to significantly increase year-over-year as we successfully implement our U.S. growth strategy across the globe. Geographically, we saw the highest growth rate in Asia and Europe, which increased by 253% and 467% year-over-year respectively. Our capital equipment accounted for 89% of our revenue, while consumables and service revenue were 11%. GAAP operating expenses in the second quarter of 2021 totaled approximately $33.1 million, an 84% increase from the second quarter of 2020. Sales and marketing expenses increased 97% in the second quarter of 2021 compared to the second quarter of 2020. Stock-based compensation increased to $2.9 million in the second quarter of 2021 compared to $1.2 million in the second quarter of 2020. On a non-GAAP basis, operating expenses totaled approximately $30.4 million in the second quarter of 2021 compared to operating expenses of $17 million in the same quarter of 2020, an increase of 79%. GAAP operating margin was 48% in the second quarter of 2021 compared to 26% in the second quarter of 2020. Non-GAAP operating margin in the second quarter of 2021 was 51% compared to 30% in the second quarter of 2020. This increase derived primarily from the interruption of the sales cycle in April and May 2020 by the COVID-19 pandemic, while the company continued to incur the non-variable sales and marketing expenditure during those months. In addition, the company's accelerated growth increased gross profit more than operating expenses, which translated to a higher operating margin for the quarter. Also, in the second quarter of 2021, marketing activities were still lower-than-expected in some regions due to public health restrictions prompted by the COVID-19 pandemic. GAAP diluted earnings per share in the second quarter of 2021 were $0.95 compared to $0.21 per diluted share in the second quarter of 2020. Non-GAAP diluted earnings per share in the second quarter of 2021 were $1.02 compared to $0.24 per diluted share for the same quarter of 2020. We completed the second quarter with a strong balance sheet. As of June 30, 2021, the company had cash and cash equivalents, marketable securities and deposits of $332.9 million. On the cash flow front, the company generated $46.8 million from operating activities for the second quarter of 2021. With that, I will turn the call back over to Moshe.

Thank you, Yair. Thank you, Shakil. Operator, we are ready for Q&A.

[Operator Instructions] Our first question today will come from Travis Steed with Barclays.

Just curious if you could talk about some of the trends for the quarter and how July is shaping up. Just curious to think about how to think about Q3 and the difficult seasonality. And particularly in light of your guidance, looking at the full year guidance, and basically, the full year assumes about 0% to 7% growth in the back half versus the front half, which is well below the 2019 trend. So I mean, if that was conservatism or if you're actually seeing something there on the seasonality part?

Well, this is Moshe. I will try to answer the question. Usually, going forward, the third quarter is usually the slowest quarter of -- in this business. Because on the summertime, people takes vacation and patient do not like to do a major aesthetic procedure. So the third quarter in Europe, month and a half, they're on vacation and in other countries as well. So this -- the third quarter is the slowest one. The fourth quarter is usually the strongest one for several reason, but this is what we see in the last 20 years, that I'm involved in the aesthetic -- in the medical aesthetic field. As far as visibility, this business is no backlog business. So we don't have visibility. We know who do we want to approach. We have the budget. We know what kind of marketing activity we're going to do this quarter and the fourth quarter. And the guidance that we gave between $305 million and $315 million, yes, you're right. It's conservative. But we try to be conservative and do a better numbers than given numbers that we will not be able to deliver.

Do you think the Q3 revenue dollars will be able to grow versus Q2? Or do you think they're going to be down versus Q2?

I don't know now. It's just the end -- the first -- the beginning of the quarter. We are not even 1 month out of the quarter. And I don't know. We are growing overall. In 2020, the third quarter was stronger than the second quarter, but this is because of the situation with the COVID. In the second quarter of 2020, during the months of March and April, most of the doctors around the world, not just in the United States, has closed their clinics. And basically, we had revenue for 1 month. And therefore, the third quarter, once the clinics opened was stronger than the second quarter than -- but 2020 is not the typical year as far as seasonality. What will happen this year? I cannot say. We're doing our best to do better than the second quarter, but it all depends on how the markets will behave, and of course, the seasonality of the aesthetic business.

Okay. And last question, I'll jump back in the queue. And that's on the hands-free, looks like as a percent of the U.S. revenue, it peaked here in Q2 of last year, around 46%, and now we're down to about 29%. Just curious how you think about the hands-free growth moving forward? And as a percent of U.S. revenue or the growth overall? If you could give a U.S. versus OUS installed base number total, that'd be great, too.

Shakil, can you answer that?

Yes, obvious. So we do see it actually continuing to be a strong portion of the segment. We also, as we mentioned, we do have Empower coming out. So of course, it's not going to be a cannibalistic technology in any which way. However, I do still see the hands-free being a main driver. Yair, if you want to jump in and answer the question regarding the installed base, that'd be great.

Sure, absolutely. We have 9,150 units installed base worldwide, out of which 4,650 in the U.S.

Our next question will come from Matt Taylor with UBS.

I guess the first one, I just wanted to see if I could get more color on the quarter. We've gotten used to good results from you, but this was a particularly strong quarter. And I wanted to know if there's anything special that happened? Were there any big orders or new countries? Or was this just a continuation of momentum that we've seen building here?

Well, Matt, this is Moshe. I think it's combination of everything that you mentioned. We had strong quarters in several countries. The leading countries were Korea, China, that the market is started to open. Russia, I would say that even the U.K. was very strong this year -- this quarter. In addition, of course, to the U.S. and Canada. And also 2 countries in South America, Brazil and Mexico. We did very well, more than what we expected. So these are good news. And the good news is that OUS were growing faster than what we thought and faster than what we projected. But overall, this quarter was strong because I believe the market is open due to the fact that in most countries, people start to understand that they have to live with the Corona and business back to usual. In the United States, I would ask Shakil maybe to answer and tell you why -- how we did and what was the main reasons.

Yes, Matt. So thanks for the question, of course. I do think that I've seen, particularly to the U.S. and Canada, we saw the same kind of demand that we had seen, of course, in Q2. But we've also -- a lot of the training that we've done as a group and as a team has really started to pay off. A lot of our teams that we have set up throughout the country have been working synergistically to really get to the point where we now have a very, very solid force. And we're still growing that, which is great. We also did see some of the in-person events, which I had mentioned earlier. That was a very big driver, and we do have that back loaded into Q3 and Q4 as well. So I think that will be a nice little push in there to really help us get to the next level.

Okay. And I think we were all anticipating the Empower launch here in ophthalmology. So I guess I was wondering if you could discuss, a, commercially, how should we think about those launches? How quickly can they ramped versus being gated by training or are these being new ophthalmologists, especially in new call point? And then can you discuss any data that you've seen around the different packages within Empower in ophthalmology that we could take home and think about how effective those technologies can be in different indications there?

Yes, sure, Matt. So I'll let Spero jump in on the second part of the question going towards the data. But when it comes to Empower and even the ophthalmology side of things, I think with Empower, the one thing that we've always done as a company when we started off with a minimally invasive technology, we got it in the right hands. We like to make sure that it's obviously a tried proven technology. So we've established that, which I'll let Spero jump in on. But right now, as we launch it, we're not going to just rush to -- thankfully, we're in a position where we don't necessarily need another product to keep growing, but it's always great to have and which is why we're constantly innovating and introducing new technologies. However, with the women's health and wellness market, it's kind of been a market that has been -- it hasn't been touched in quite some time. And there's not been much focus on it. So we see a huge window. When it comes to training and getting people kick started, it will be the same as all of our other technologies. So that's going to be a super smooth transition. We do have some really, really good thought leaders that are already working with the technology and are very happy with what they're seeing so far. So again, we're not going to rush into this thing and just go gangbusters right off the bat. But I do think it will help add to the numbers for Q3 and Q4, obviously. Spero, did you want to chime in on the data question?

Yes. Sure. Matt, good to hear from you. Thank you for your question. I think it's important that just like in plastic surgery, where we set the foundation, differentiating ourselves between -- within the RF community, the fact that we have bipolar technology versus unipolar. And we did that in plastic surgery, and we show the fact that bipolar is certainly the way it's delivered, the way we're delivering it in our patented technology is far superior to unipolar devices. Within the years, you saw that the companies that had unipolar basically have gone to the wayside and are no longer -- are not able to compete in this sector. I'm not touching the laser, just talking about RFs right now. So same thing in gynecology, women's health. Our first study within a retrospective study and which is already published, came out last couple of weeks ago, and it showed the statistical difference between bipolar and unipolar. So whatever unipolar devices are in the market, again, here we go, same thing. Bipolar is going to be a lot more effective and targeted and all the patents that InMode has make it a superior delivery platform. That's our foundation to push off of. Right off the bat, we have that security. We know we have the right delivery system. And what we're seeing now with the studies that have already performed over the last 2, 3 years, we're seeing women when it comes to SUI being dry a year out. And that's a big, big, big deal. In addition to that, we're also seeing that a lot of the symptoms of a overactive bladder are [ stained ] or gone for urgency and frequency. We're not saying we have a treatment for that segment yet, but we're saying that the symptoms are markedly improved. And this is all per what we're hearing from our study group patients. And now that we're, as Shakil mentioned, have rolling it out to some of our luminaries, they're very, very excited about it. So overall, I think we're in the right place to give the sales force what they need, the foundation they need to push off and go confidently into doctors' offices. We feel confident that we have a technology. Thankful to Mishka, and what he has developed with us that we can go into an office and say, if you're a premenopausal, you have a BMI of 30 and you're healthy and young and you have these issues of SUI and all this effect that have, we feel very confident that we can treat you, and we can help you out. And this is having a major impact in the markets that we're seeing the patients are lining up, just word-of-mouth because there simply hasn't been a really good solution up to now. So as far as the data and the study is meant, we're very confident that we'll do really well with this. Ophthalmology, we're getting there. We know all our objective measurements are there. They're planning out just as we expected for dry eye. But I'm not going to get into the details, get about the studies too much. Just saying that you're going along just as expected. We're very happy with the way things are going. I hope that answers your question.

Our next question will come from Kyle Rose of Canaccord Genuity.

So I just want to start from maybe just a more thematic, big picture question. You have really strong expense control again in the quarter. I mean there's no surprise there, given the -- this lower activity from a commercial perspective during COVID. But can you just maybe frame out OpEx expectations on a longer-term basis? I mean you've put a unquestionably stellar results, despite these restrictions in place in the pandemic. I mean have your thoughts towards the spend required for this commercial model changed at all moving forward? I mean you just put up 51% non-GAAP operating margins and a record revenue quarter. How much do you need to continue to spend to really drive this growth moving forward?

Well, this is Moshe. I think the typical P&L is what we are showing. We will continue to maintain 85% gross margin. Although I have to say that it's become more difficult because all kind of expenses like shipping, logistic are going to the sky. And also, there was a problem with the supply chain of component around the world. And we fight 24/7 every day in order to make sure that we will have enough component and subassembly to maintain the production line up and running and deliver every system that are older. And at the same time, maintain the 84% to 86% on a non-GAAP basis gross margin. As far as R&D and G&A, it will stay the same. And I don't think we have to measure them percentage-wise. We're spending around $2 million a quarter on R&D. And that's enough in order to maintain the R&D pipeline of at least 2 indication, 2 platforms or 2 product every year. As far as G&A, I'm sure you can compare us to any other company in the field or in any other field and realize that we're very lean and mean and humble company. We have $1.50 million to $1.7 million per quarter on G&A. And the question is, how much we need to spend on marketing and sales? As we grow and as our business will go back to usual, I believe we will spend more on marketing and sales, especially on marketing. In the last 1.5 years, we spent less on marketing because the market -- the world was closed, no exhibition, no conferences. Everything was done on the Zoom. Salespeople did not travel much. We managed. Of course, we managed. But as business will go back to normal, we will spend more on marketing. And you should take into account something in the range of 37%, 38% marketing and sales expenses year-over-year. All the rest will stay the same. So overall, the P&L structure, the typical P&L structure that we're showing today will remain even if it will continue to grow in the same pace that we did in the last few years.

That's very helpful. And then maybe can you talk just a bit about -- at least within North America, a great growth. How much of that is coming from historical core market when we think about plastics and derms? And how much of that is coming from some of the other medical specialties? I know that will probably change as you launch the more therapeutic products moving forward. But where do we stand now with respect to the installed base in core versus noncore?

Yes. Great question, Kyle. So when it comes to core versus noncore, we obviously started off with a minimally invasive line and we penetrated the plastic surgery market. We continue to. It has great brand recognition. Consumers are actually asking for a lot of the products by name, whether it's BodyTite or Morpheus8 or some of the hands-free technology. But as we've rolled out some of the hands-free technology and some of the other things that are a little easier to implement, we've actually seen growth in a different number of categories in terms of specialties. So when it comes to the derm market, that was one of the goals that we had, we never really did too well in penetrating that market because the focus was on the plastics. And slowly, we've really started to get some big names on board, and it started to kind of work out where things spread and word travels. Now when it comes to the noncore market, the noncore markets always -- when you talked about more therapeutic devices, of course, we're going to be approaching women's health and wellness specialties, some of the ophthalmology practices, so on and so forth. But one of the key things, which I've said in the past, is that as long as managed care insurance based medicine keeps going where it's going, overhead is not coming down, right? In fact, it's increasing. And so as long as that's there, which I don't see that changing at any given time soon, we'll always have that market that we can actually penetrate. So the opportunities are endless when it comes to that. And then obviously, with the new products launching in the dose.

And then just one final question. I'll keep spreading that around. Spero, what are you seeing in your patient volumes with respect to demand and waiting lists? Has there been any change in demand as the economy has reopened and perhaps patients are reallocating discretionary spend dollars towards vacations and activities like that? Or are you still seeing robust demand in your practice?

It's a great question. I'm based in New York City. And considering what's happened here, certainly would be reflective of certainly big and the urban cities as well. Our demand is there. It's really strange. At this time of the years, things do start to slow down. And -- but it's coming in heavy. It's coming in heavy and it continues to come heavy, which is unusual. Last year, I'd say it was due to pent-up demand. This year, even though traveling is coming back and people are starting to spend on other things, it's still not at a critical mass, I think. There's still lot of people who are scared to rather stay home or not even go overseas or whatever they're doing. So yes, our demand is strong. It's solid all the way into September. Waiting list, it's no different than -- at least here in New York, it's about a month out. But we are surprised. I can tell you this right. I'm surprised it still carry on, but I think it has to do more with the fact that we're not quite there yet. Considering the delta variant and all the scare that's caused, I think people are still cautious. So what do they do? They're still staying home. The majority of them are still are staying home, regardless of the increase in the travel industry, and they're spending on what we do. The most interesting part here is, again, a lot of percentage of the patients, at least over 1/3 of the new patients coming in have never had anything done before. It's the first time they've considered. So this has definitely opened to market, and I could say there's a lot of confidence. We predicted that last year, and we're seeing it continue this year.

Just to add to what Spero said, I think the best way to measure is to show and to see how many disposables we are selling every quarter. We're getting close to 100,000 disposable every quarter. And this is only for the surgical part for the minimally invasive and ablative because all the other equipment and platforms that we manufacture do not need disposable. The hand-free that are not need disposable and also the others. We're growing 20% quarter-over-quarter with the numbers of disposables that we are selling worldwide, worldwide. And that's a good measurement for the usage of the systems.

Next question will come from Mike Matson with Needham & Co.

So just on Empower, there is obviously a large population of OB/GYNs. How do you sort of plan to target the ones that are most likely to be interested in a product like this? And then do you have a sense of the fraction of the OB/GYN population that would consider this type of product?

Yes. So good question. So we -- this isn't the first time that many of our North American sales force have been going out to the OB/GYN market. When MonaLisa Touch was launched back at Cynosure, there's a good percentage of people that had been through that launch. So this is different because we're going to be able to offer multiple different things when that just covered vaginal atrophy. When it comes to what we're going to be doing here, there's going to be -- as we launch it, it will obviously get out there. But there's going to be a large number of different things that we're going to be able to do. So when it comes down to going after them, typically, it's going to start with your OB/GYNs, your urologists and your urogynecologists. Now the thing is, is that when you're targeting that market, the hardest hurdle for them is to understand that they can't get a patient to fork up $30 for their co-pay, yet they're going to spend $2,000, I'm trying to fix something. Because we've seen this before and because a lot of these solutions are more medical based and they improve quality of life and wellness significantly, we have seen that transition actually been quite smooth for that. So as we penetrate those markets, we've already gotten some of the key thought leaders, as I mentioned earlier, on board with this. And that typically holds a lot of weight just to make the others feel comfortable. But it has to be a good mix of academics and also people that can get up on a podium and speak, which we've been able to accomplish already.

Okay. And then I didn't hear any mention of Envision and ophthalmology area. I think you were targeting to launch that also in the second half of this year. Is that still the case?

The Envision platforms, we are planning to launch sometime toward the end of the year. I have to say that we already received clearances for all the applicators from the FDA, and we are working on other countries as well. So if everything would be okay and the Corona next wave will not close countries, we will be able to launch it sometime November, December.

Okay. And then this is probably a difficult question to answer, but how should we think about market penetration among the plastic surgeons and derms for the more aesthetic type products? I mean, look, I understand you're going into OB/GYN and ophthalmology, and those are your greenfield opportunities. But you've sold a lot of units in the plastic surgery, thermal, all of the stall base has gotten quite big, but yet, you're seeing really strong growth still. But I guess my one fear is that that growth, just all of a sudden slows down unexpectedly because you kind of saturated the market. So based on the numbers, it doesn't seem like you're near that point, but I just wanted to see what you thought on that.

No, that's a good question. I mean I think the way to look at it is when it comes to penetrating the markets, and I mentioned that earlier in terms of dermatology. We have -- we actually don't have a super strong penetration in the derm world, but we've started to, of course, in the last 2, 3 quarters. So I don't -- keep in mind though, I think the biggest thing here to note is that we're not a one-trick pony, right? So if we had just one product, and that's all we were going to sell, then yes, I'd understand concerns for penetration. However, I mean we have so many different platforms that can all do something different, which allows our sales force to go in and actually customize what makes sense for the practice. And as you heard Moshe and myself mention, we've seen people consistently be able to actually introduce certain technologies into their practice. And with the consumable numbers that Moshe had talked about, we do see people utilizing their units, which might sound rare, and that's kind of the whole point of this. But typically, when they get one unit and they do well with it, they want to add in a second or a third unit. And our post-sale team, which has done a phenomenal job, and our sales team, which has done a phenomenal job are trained in the sense that they know exactly what to do when, for the most part. So I think because we have so much different technology, and then obviously, the new stuff we're constantly innovating, that's why we're seeing this massive growth that we've had. The companies that we've seen who've gone stagnant are either trying to get technology from overseas, rebranded, repackage. There's been plenty of different companies that have just rebranded old technology, and that's not innovation, right? So I think because of Dr. Michael Kreindel and his brand in the way he creates these things, when we give him some ideas as to what the market needs, I think that's really a big differentiator. And I think that's why we're -- frankly, we're not worried at all about oversaturation.

Mike, this is Spero. Really, just to answer your question, it's a plastic surgeon. I think what we've been used to in the past with energy-based devices, on average, in the plastic surgery market, you have a 10% penetration. That number hasn't really changed until we came along. And the reason is there's a basic change in the way we're doing things for plastic surgeons. This is not just a one product that just like Shak mentioned, it's going to go away, and I'll come back. Just like every plastic surgeon has a device, for example, for liposuction, that's a staple that's every operating room has that device. We -- the whole goal here has always been from the very beginning, and that's why we took the hard road to approach this group first, is to make sure that our machines are the exact -- have the exact same sort of view. In other words, you need a tiny device, you have to have this. It's standard. It becomes standard of care across the board. And in that respect, energy-based devices, this is the first time we're getting so far into it because of that basic seismic change in the ability to tie in skin, we took the holy grail. So in that respect, we have a long way to go still. We're not resting on our laurels. We have the early adopters. Now we have the main plastic surgery, but we still have ways to go. We're not concerned about it. And the innovation, of course, allowing the plastic surgeons to develop new operations, new ways of doing things, there's no -- that's the biggest benefit there is because when they're doing it themselves and developing new things for us because they're finding solutions and they're excited about it, that just drives growth exponentially.

I just want -- this is Moshe. I just want to add on what Spero said. In the United States, we started early in 2017, 2016. But on the ROW, we are in a very embryonic stage with plastic surgeon. In those country where we have a clearance from the regulatory body, we're just starting to introduce it with a greater, I would say, momentum. So we have -- overall, we have a long way to go in order to penetrate all the market.

Our last question today will come from Jeff Johnson with Baird.

Spero and Shak, maybe I could put some numbers or maybe you could help me put some numbers on some of the conversations that just took place, and I think all of that was very helpful. But if I look at your 4,650 installed U.S. base, and we know there is what, maybe 17,000 derm plastic and aesthetics in the U.S. That would say penetration rate about 25%, 27%, somewhere in there. Obviously, some of those docs do own 2 platforms and things like that. So do you think that penetration right now is closer to 20% instead of mid- to upper 20s? And then Spero, to your point, on standard of care, do you think that penetration, and I know it's tough to predict and I'm not -- wouldn't hold you to this, but can that get to 40%, 50% over the next 3 to 5 years or something? Just how to think about kind of the numbers today and where those numbers could go?

Shak, you want to handle the first part, and I'll handle the first second part. Thank you, Jeff. It's a great question.

Yes, great question, Jeff. So I think when you look at it, it is lower or closer towards the 20 -- lower 20% side of things. So there is some upside there. But like you talked about, some of these specialties do own 1 or 2 or multiple units. Again, not to sound redundant, but going back to what I was saying is that there is -- if you have 17,000 of those core specialties, well, you started adding it up where you start doing the math and multiplying by 2, 3, 4 units, that number is a pretty big runway, right? So I do think on that side of things. With the plastics, with the derms, we've seen it happen. We've already been seeing it currently. And I think we're going to keep seeing that in the future just based on people being -- I think the key thing here is that physicians need to be successful with their technology. And if they're successful, they'll reinvest with us. And that's trying -- that's been a big key to the success from the last quarter and as we start gaining more brand recognition. Spero, did you want to chime in on the second part there?

Yes. So Jeff, it's an excellent question. Your average plastic surgeon, the ones that do pure cosmetic surgery are a small minority, right? So majority of plastic surgeons out there do about 50% reconstructive or 50% cosmetic as their practice matures. So our applications in their reconstructive world haven't even started. Skin tightening is not just a cosmetic thing for aesthetic surgery. It's overall has other applications everywhere. And as this technology starts to mature, as it starts to enter into the training centers, which we've already seen, it goes all back to -- if you look at the laser industry what Moshe has said, the major industry back in the '90s. So RF, we think is superior in many ways. It goes deeper. We can modulate a lot of things. So we're just in the beginning of the peak of a whole industry change. And if it wasn't the case, our competition wouldn't be trying to continuously try to develop RF, right? So if you look at that and step back at the 30,000-foot view, do we have a runway because just like laser penetrated whole market segment of this type of doctors, we think RF has that potential runway as well. And we are -- with what we have and with the way our technology is protected and patented, it's all clear skies as far as that's concerned, Jeff. So to put things in perspective, Shak said absolutely the right thing, and I agree with him. We have ways to go, and we're confident about that.

Yes. Fair enough. And then last question for me. Just on the GYN market. Hearing some of the SUI data points and overactive bladder. Is that the main way this new platform is going to be used? I know it will be the way you market it, obviously. How much do you think off-label use will be for other type of rejuvenation procedures, things like that, that we've heard about in the past? Will the appeal be on both the therapeutic side and the cosmetic side? Or is it -- is this really going to be focused on the therapeutic side only?

Jeff, that's a great question. As you know, we have to be very, very careful because of the history and the language that the FDA put out there. Cosmetic wise, we certainly, as you know, the American Society of Gynecology is against certain things in the cosmetic world for this respect. But there's always a demand for that. I think to push, if you had to look at this platform as a Swiss army knife, it's got many modalities and many applications. And we -- and our whole mantra of going into physician offices and saying, look, here is your core training. Here is what you've done. Here is a patient population that's already in your office. Already, you're not taking advantage of them. In other ways, you don't have to go out and just sell your market this because you have a captive population, right? So every woman who delivers is a potential patient that's going to benefit from Empower's ability to therapeutically help propel the floor to help certain things like we discussed as well as solely move into cosmetic, right? At the end of the day, we're an aesthetics company. And introducing a platform into a segment where they can actually find a medical indication, use a medical indication and then slowly ease them into the cosmetic, that's been always our mantra. But if you're asking a specific question, is this platform, how this launch is little different than all the other ones? Yes, we have a strong therapeutic thing that we're going after. That's why it took us 3 years to do the studies right and bring the right key opinion leaders on board. Does that answer your question, Jeff?

This concludes our question-and-answer session. I would like to turn the conference back over to Moshe Mizrahy, Chairman and CEO, for any closing remarks.

Thank you, operator. Again, I want to thank everybody who is on the line today that join us in the second quarter earning call. I want to take all of our employee worldwide. I assume many of them are listening to us today. I want to thank to our investors for the trust and the loyalty. I want to thank all the management team of InMode who are on the line today and others. And we all look forward for the third quarter to have you all joining us the same as today. Thank you all.

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