InMode Ltd. (INMD) Earnings Call Transcript & Summary

So good morning, everybody. My name is Luke Sergott. I cover life science tools and diagnostics here at Barclays. It's my pleasure here to introduce Yair Malca, CFO of InMode. And I think he's going to kick off here with a little bit of video before the presentation. And then afterwards, we'll hold some Q&A. Go ahead.

Thank you very much, Luke, and thanks for having me. I'm the CFO of InMode. InMode is a leading provider of aesthetic medical device that's mainly focus on value frequency, and we'll touch about that in a bit later. But I think the best would be to start with a short video. Go ahead, run the video. [Presentation]

Excellent. I usually find this short video. Very -- it helps a lot of investors, especially that don't know the company or the procedures to visualize how some of the procedures look like. Now we'll move to my presentation. So who we are? InMode, as I said, is a leading provider of aesthetic medical device solutions. We are going to be -- probably estimated to be the leading company this year also in terms of revenue. We mainly focus on radiofrequency-based technologies, but not only. And we try to cater the more traditional aesthetic physicians, which are usually plastic surgeons, dermatologists, even some med spas, but not only. We are also expanding to OB/GYN, ENTs and ophthalmologists and later on to also other communities. Our vision, you can call it, is basically to -- by using radio -- minimally invasive radiofrequency to bring more procedures that are currently done in the hospital, in the operating room into the physician's office. We started this in aesthetic by bringing, for example, procedures like facelift from the operating room using FaceTite, which is a minimally invasive radiofrequency solution, into the physician's office. We have worldwide regulatory approvals for our technologies, and we keep adding more and more countries and more regulatory approvals in those countries that we are already in. We started the company back in 2009, but it's only up until 2006 -- 2016 that we were able to secure clearance from the FDA for RFAL, which is our flagship technology, radiofrequency-assisted lipolysis. And since then, things started taking off in terms of growth and profit. It's important for us not only to substantially grow the business, but also to be as much as profitable as possible. Last year, our EBITDA was around 50%, 5-0, which is pretty impressive. We have direct sales in North America, in the U.S. and Canada and all across the world. And we keep adding. In the last couple of years, we added a new subsidiary, every year almost. And as I mentioned, we are planning to expand to other communities with additional technologies. And again, innovation is not something that is just a buzzword that we like to use. We actually were able to bring to the market in the last few years around 2 new platforms every year. So we stand behind this innovation concept, and that's the plan also moving forward. Even though we have some very successful product in our pipeline, we keep bringing more and more products to the market. And that's part of what we do. And again, we definitely have a very strong management with a lot of experience in the field, and we'll touch about it in a second. Regarding the number. Q4 revenue was $110.5 million. As I said, 50% net income, which is $55.2 million. We have 85% gross margin. We've been maintaining between 84% to 86% gross margin or -- sometimes even 87% in the last 4, 5 years. And the plan is to continue to keep that gross margin also in the future. This is very important for us because that's what helps us invest in sales and marketing and invest in supporting our physicians, our customers. We have 11,600 units installed worldwide, approximately half of it in the U.S. Again, this is fairly not a big number, but just to show you that we are still in the beginning of our ramp and the potential is there. Overall revenue for the entire year was $357.6 million. For this year, 2022, our projection would be to be around $420 million, which again, I believe, will position us as a leading company in the space, selling in 71 countries. As of the end of December 2021, we had 170 direct sales reps. Currently, we have more. We continue to hire more in order to assist with our expansion. We have 7 patented technologies, a course of 10 product line families. In terms of management, many of our top executives have years and years, and some of them have decades, of experience in the aesthetic medical device world. So this is really one of the things that sets us about in terms of experience and execution and innovation. Regarding our global presence, as I mentioned, we have fully owned subsidiaries in U.S. and in Canada. Our headquarter, including the R&D and our manufacturing will be done out of Israel. We also have direct subsidiaries in Spain, U.K., France. We opened a new subsidiary last month in Italy. We have 1 in India, 1 in China and 1 in Australia. And again, we plan to probably continue to add more direct subsidiaries in the future. What InMode tapped into basically is what we call the treatment gap. Before, there was many noninvasive solutions, mainly around laser and some IPL and light-based solutions that had their place still to the day. But in terms of body or face contouring, they are really limited in what you can do with noninvasive solutions. On the other end of the spectrum, there are -- with full surgery, just like, if -- we'll take, for example, the face. So the -- you can do some noninvasive solution treatment to your face. The results will be okay but not as substantial. On the other spectrum, we can go ahead and do a full facelift operation. But again, there are many patients that are either scared of going under the knife or the skin condition is not bad enough to justify a full facelift. And this is exactly the demographic that we are after. All the patients between 35 to 60 years old, I think, would be perfect candidate for our minimal invasive solutions. It's done under local anesthesia in the physician's office with minimum downtime, less than 48 hours. And this is basically where we see the demand in the market by the patients for procedures that we saw substantial results, almost as good as the full plastic surgery but without all the shortcoming of a full plastic surgery. And that's basically the paradigm shift that we created in the space. Moving -- it's not another upgrade in -- another laser with different wavelengths. This has really changed the paradigm shift and the mindset in the space and amongst the physician community. And that's basically what sets us apart. We have all the traditional -- what we call traditional laser companies. And then there is InMode, which focus on minimally invasive solutions. Again, we had the foresight not to be afraid of going into the minimally invasive world because if you really want to create a significant body-shaping effect, you need to penetrate the skin and penetrate the fat layer. So in terms of the communities that we serve, as I mentioned, gynecologists, ophthalmologists, ENTs, and of course, the main aesthetic market, which is aesthetic derms and med spas and other aesthetic providers. If you sum all of them up, you have in the U.S. more than 100,000 physicians, plastic surgeons. And then globally, we estimate to be double than that. So the potential is huge. Remember, we have only 11,000 units installed out there in the field. So the potential is still there. This is our product portfolio of the different technologies that we offer. We divide them into 3 categories. One would be the surgical and the minimally invasive category, which is our main category. This is radiofrequency, minimally invasive solutions. This is our bread and butter. This is where we shine. And 70% of our revenue is actually coming from that group. Then in the last couple of years, we introduced the Hands-Free procedures and technologies as a complementary technologies to the minimally invasive technology. They can be used as maintenance or as a treatment on a stand-alone basis for people that don't really need a minimally invasive intervention. This accounts for approximately, I would say, 20% -- up to 20% of our business. And then we have what we call traditional lasers. And this is more traditional aesthetic procedures, like hair removal and noninvasive body contouring. We do have very good lasers, but this is only a small part of our business, less than 10% because we don't want to be in this space. The laser market is saturated. We have it. So for other physicians that want to buy from a single source, a one-stop shop, we'll be able to offer them a very broad aesthetic platforms portfolio. But again, this is not a focus of our business. In terms of growth and profitability, up until -- as you can see, up until 2021, we added $50 million to the top line every year. In 2021, the space basically exploded, and we added $150 million, which is more than what we originally expected. So 2021 was a very unique year. We continue -- plan to continue to grow also this year. This year, we estimate to be at around $420 million. In terms of profitable net GAAP income -- net -- non-GAAP net income, we expect to be at around -- we had 50% last year. We probably will be around 48% in 2022. We expect also to pay -- start paying taxes in 2022. Up until 2021 included, we had a 0 corporate tax rate. And in 2022, this would go up to between 7.5% to 10% corporate tax rate. So the EBITDA would still be 48%, but the net income, just to clarify, would be lower because of the tax rate that we expect to see this, starting this year. This is our manufacturing facilities in Israel. We have OEM agreements with 2 major partners. Basically, we kind of outsource some of our manufacturing, which allows us almost an endless capacity. But we are monitoring -- we monitor them very, very close. They are 20 minutes away from our R&D team in Israel. They provide us the space, the employees, and we provide them the know-how and the quality control. And that's what basically allows us to keep the ATV 5% gross margin and support the growth because once you work with major OEM manufacturers, you almost have endless capacity with minimum capital investment. The way we market to the doctor is, first of all, we engage with key opinion leaders and luminaries in the space. These are some of the big names in aesthetic, plastic surgeon -- this -- in the U.S. So we engage with them, they publish many clinical studies in the most prestige journals and magazines in the medical field. And that, we believe, help us selling to doctor better than any brochure or any marketing activities. Clinical studies usually is much more effective in this regard. We also started marketing to consumers, direct-to-consumer marketing. We engage with Paula Abdul as our brand ambassador in order to increase the demand also to our physicians. And these are some of the awards that we won over the years. And with that, I'm perfect on time. Thank you very much, everybody.

Thank you.