All right, why don't we get started? Good afternoon. My name is Jeff Johnson. I'm the Senior Medical Technology Analyst at Baird. Our next presentation this afternoon is InMode, a leading provider of innovative, energy-based, minimally invasive surgical, aesthetic, and medical treatment solutions. With us today from InMode, we're happy to have Chief Financial Officer Yair Malca. And I think we're just gonna go straight into Q&A, Yair. So you know, I guess I'll come sit back down in a second. But first question, just because it's timely and it's the news today, you know, can we get a $100 million repurchase every week or so for the rest of this year? Um- It seems to be doing well for your stock today, so. Unfortunately not. Yeah. But thanks for having me, Jeff. Regarding the share repurchase program, we did announce today. That's the second one we end up doing this year, but for technical reason, we consider the first one we did this year as a 2023 plan, where just as I mentioned, for technical reason, we execute that earlier this year. And the ones that we announced today is basically the 2024 plan. Okay. Usually the Israeli tax authorities allow you to do up to 10% share repurchase every year without this being treated as a dividend for tax purposes. Right. Yep. So as we completed the first one, and now we are doing the twenty twenty-four one. And I think that's gonna be it for- Yeah ... for the year. No, that makes a ton of sense. You know, I, I guess the last time you and I talked on that, which would have been maybe a month ago, I'm thinking maybe it was on the- Yeah ... day of your second quarter report, you weren't sure if the Israeli tax authorities were gonna allow a second one. So it just so I understand, they, you were able to retrospectively kind of call last repo a 2023 event? Yes. This is a 2024 event. Yes. That's how you get around the same rule. That's the approach, that's the tax position that we are taking. Yep. We consulted with several tax advisors. Okay. They all support our understanding... Yep ... and the position that we are taking. You know, from speaking with investors, even if the Israeli Tax Authority will ever challenge that position in the future and will end up paying 15% more- Yep ... at the current share price- Right ... it's still something that they view as attractive. Yeah. The investors view as attractive. So again, we stand behind our positions, but even if this will be challenged by the Israeli tax authorities, I think we will still be in a very good situation. and that 15% potential tax or w- Yeah ... that would be on anything above and beyond a 10% per year limit. Remind me, that's borne by the shareholders- Yes ... who will get the dividend, right? Correct. That doesn't impact your balance sheet, but it is something that obviously investors would have to bear. Correct. Okay. If we do more, Yes, if you do- ... anything more than that. Ten percent. Yes. That's something that it's not going through the P&L. Okay. All right, well, I think enough on technical accounting stuff and what have you, and then maybe we'll move into the fundamentals of the business. You know, I wanted to start on maybe the patient side, if I could. The summer is always tough to gauge patient interest. I mean, I don't remember if I learned the term covering you guys or if I've learned it elsewhere over the years, but the swimsuit season, a lot of patients not going in and getting work done over the summer, for those kind of reasons, but we did see some weakness on the procedural side this quarter, in the second quarter, and again, hard to judge, but it did seem to be there. You know, what are you seeing from a consumer and demand perspective, maybe just recently over the last couple few months? So as you said, yeah, Q2 was the first quarter where we saw an overall decline in our disposable sales. And our sales of disposable is the best way for us to learn about the demand for our aesthetic procedures, in addition to follow some of the other companies in the space. We definitely see a slowdown or a softening demand in the aesthetic space, and specifically demand for procedures that are tends to be on the more expensive side. Which we consider ourselves as a fairly mid-level priced procedure. Yeah, three to five thousand, four to six thousand- Correct. Somewhere. Correct. Yeah, and you are right. July and August, we don't see obviously any improvement there. July and August tend to be slow months for aesthetic procedures, mainly because that it is not advisable for medical reasons to be exposed to the sun before and after- Yeah ... many of those aesthetic procedures. So, it's very hard to draw any conclusion from July and August, but overall, the fact that we did see a decline, and most of the decline came from North America. Yeah. From the U.S. and Canada, we see, we see a softening demand. Long term, we feel comfortable that the demand for aesthetic procedures in the North American market is not going anywhere. It will come back. Right now, with the economy and the consumer confidence and the shaky job market- Sure ... we believe patients are being very cautious with what they spend. We also believe the doctors seeing this slower demand, you know, might hesitate before, you know, acquiring more capital equipment to- Yeah -to their business. So both of these kind of things is feeding the capital equipment side as well. The recurring revenue- Sure. or lack thereof, the weakness in the recurring revenue feeding the capital equipment as well. How would you contrast that with international, where, you know, you said this is mostly North America? You know, is it consumers are just less prone to macro issues outside the US or outside of North America? You know, we could also argue that you're just earlier stage there, so your penetration of procedures- Exactly that you've done, I, you know, is not masking, but- Yeah ... but you can grow off a smaller base in those international markets. Y- Is that how you kind of think about life? Exactly. In the US market and in Canada, in the North America market, just because we put focus all our focus on this market in the early years, we became to be almost the one of the biggest player, right? Yeah. So when you are the biggest player in the space, you cannot avoid the macro pressure. In the international markets, we start only in the last several years to invest heavily in the expansion there. In some of the countries, we still have a long way to go. So when you are a smaller player, it's easier for you to grow despite those headwinds. And we do see the headwinds in the international markets as well. But as I said, we can grow in some of the countries despite those headwinds. There are still some countries that we are not growing, but we have those countries that we are growing nicely and offset some of the other ones. Okay. And are there any major countries over the next couple years you could expand into that you're not? I know it's been a, you know, long time coming to really get bigger and approved by CFDA in China. Mm-hmm. You've, I think, made some entry into Brazil in some of the Southern European countries. But, are there other big countries that you're waiting to go into, and then in some of those big countries historically have good demand for aesthetic procedures? You know, are you still early stage enough there that you've still got, you know, three to five years of really good penetration left, even if... once we get into a normalized macro? No, absolutely. absolutely. I think right now, just so you get a sense, outside of North America, no single country account for more than 3% of our total revenue. So we are pretty spread out, and we have big potentials in many of these countries. And in order to exploit the most potential from each country, it's best to go direct in that country, right? In China and Brazil, that you mentioned, we go through distributors at the moment. This year, we went direct in Germany- Mm-hmm ... and, Japan in the past year. Again, it takes time from the moment you decide to take direct, to go direct in a certain country until you see the full contribution. But definitely both Germany and Japan are a big economy with a nice demand for aesthetic procedures, so they can grow nicely. And China is another country that we are focusing on. We are doing pretty nice with the current distributor, and we are looking into ways how to expand that, both the penetration and maybe going direct. Okay, and remind me, are there any products, sizable products, that you're still waiting to get approved by CFDA in China? Yeah, absolutely. Yeah, right. We have only half of our portfolio, I think, approved in... Is that still where you're at? Yeah. I wasn't sure what the update was. And all the new products, we should expect to get those products approved in Asia and in some places in Europe. And so yeah, the international is still a big potential- Yeah ... growth potential for us. And we will continue to develop it. Yeah, sure. Okay, it's a question I ask Moshe every quarter, and he usually gets a little angry at me. And so Moshe, if you're listening, I apologize. But, help me understand in the U.S., the system placement's down as much as they've been 30%, 40%, 50% year over year, over the last couple few quarters. You know, how confident are you that's purely macro and interest rate driven in that, versus I think you've got, what, 10,000 placements? I forget the number. Yeah, uh- ... you've had 11,000 placements here in the U.S. You know, are you just at a point of saturation in some of your core markets, or, or incremental markets from here not as big of an opportunity? Just how to think about kind of saturation versus macro and, and interest rates. Yeah. That’s a good question. Couple of things to keep in mind. We have a very robust product portfolio. So the 10,000 or the 11,000 systems that you mentioned translate to significantly less customers. Right now, almost 30% of our customers has more than one device. Because there are, we have a, a- Mm-hmm ... broad product portfolio- Sure ... they can buy more, not the same device, of course. So the number of customers are actually much smaller, around 7,000, let's say, and in terms of penetration, it depends. If you start, if we start looking at them as in groups, so the plastic surgeon group, right? This is the community that we started with when we first came to the U.S. and spent most of our efforts and resources on. With them, yes, we are probably the most penetrated with around 25% penetration. Okay, yeah. 20-25. But if you take dermatologists, for example, with them, we start building relationship only in the last couple of years when we introduced the less invasive devices, the non-invasive, and so on. And with them, we are probably 5-7% penetrated. Okay. We still have a long way to go. In addition to that, again, and for each customer, we can sell multiple devices, right? And in addition to that, we are expanding into new categories of women's health, ophthalmology, ENT. At the end of the day, doctors that owns practices here in the U.S., if they really want to grow their practice, they can do so only so much by going after reimbursable procedures, chasing after insurance companies. If they really want to grow the practice, they would be better off introducing cash-based procedures to the practice. And I always argue that there's no better cash-based procedures for them to introduce to the practice other than aesthetic- Yeah ... procedures. So even when we go to those OB-GYNs, ophthalmologists, et cetera, we go with aesthetic procedures as well, aesthetic application as well, and trying to attract them into the aesthetic world. All right, fair enough. Two questions, I guess, follow-up questions there. One is, are there... Would there be any reason to tack into product offerings that could take advantage of, you know, what someday again, probably will be growing med spa positions, things like that? I mean, are there any of your products that you think could more heavily penetrate into those markets over the next couple of years, and can you develop even more products to go into that kind of secularly growing area? Yeah, absolutely, so we have the hands-free devices. Yeah. This is a perfect device to go to the med spa world. Again, we don't want to be too heavily dependent on med spas- Mm. - because they tend to get into some troubles during slow- Yeah ... economical, Yeah ... economic times. But yeah, it's a different, definitely a market, and we do have offering that can go to, to this market. All right. Yeah. We have the traditional also, aesthetic procedure. The hair removal. Hair removal and things like that, yeah. Okay. And then on the plastic side, I lost my train of thought for a second. On the plastic side. Oh, you guys have been selling, I think, in the U.S., if I remember right, for seven years now. Is that right? Eight years. 2017, something like that, yeah. Yeah, seven, eight years. Yeah. And I would assume, and I think we've talked about this before, your average system lifespan is probably six to eight, seven to ten years, something like that. You know, we've not really seen an upgrade cycle, although, to be fair, probably some of those docs have bought, like, the second generation Morpheus or something like that, or added hand pieces on over time and that. But is there, is there an opportunity over the next couple of years to really see kind of upgrades of older systems in the field really drive the P&L for a couple of years? Absolutely. We didn't see an upgrade cycle yet because we didn't introduce the next generation of those products- Sure ... that we launched in 2017 up until earlier this year. Yeah. Only early this year, we launched the OptimasMAX. Yep ... which is the next generation of the Optimas. Right. And, that was introduced in 2017. Yep. That was one of our best-selling device. Then we introduced the- Ignite ...... Ignite. Yeah. With the QuantumRF, which is the next generation for the BodyTite. Yeah. BodyTite Embrace that were introduced also in 2016, 2017. Yeah. This is our flagship technology, basically. This is the first time in 2024 that we introduce the next generation product to two of our most important platforms that you know were accounting for majority of our revenues over the years. People tend to forget that we are still a fairly young company, so this is our first two refreshment replacement cycle. Okay? This year, because of some of the supply chain issues and because of the fact that we are behind with the production- Yeah ... so we have limited inventory. We decide to focus the limited inventory that we're able to build on new customers. Right. Because, you know, it's more profitable for us- Sure ... obviously. So we focus that. But next year, once we have enough inventory and we get fully caught up with those deliveries, we start looking into upgrade opportunities, come up with some upgrade promotion, where they trade in their old device, get a special price to get them into the next generation products. I can tell you from my experience in the laser business, this is a big driver for revenue on new generation is those upgrades- Yeah, sure ... opportunities. For us, it's a little bit too early to say how fast we will have this kind of rollout of this upgrade, but it's definitely a big opportunity, and it is out there. Okay, and are there markets where you could repurpose, like, a traded in BodyTite, FaceTite, an older Optimas or something, and sell that in, you know, an Asian market or- Yeah ... a Latin American market? In India, Eastern Europe, yes, absolutely. We can do that. In some of the countries, they don't have the regulatory approval for the new devices yet, so we can repurpose the old platforms to be sold in these territories. Yeah, and just on OptimasMAX and Ignite RF, where are you at from a manufacturing capacity at this point? Has there been any change in the pacing of that manufacturing with what's going on in Israel? And, you know, obviously, we ask that every Yeah ... quarter. Has anything worsened in the last month on the workforce or ability to manufacture? Again, right now, nothing is worsened. Things are the same. We are on pace to... I think we said we expect to complete all deliveries and be fully caught up by the end of October. Yep. Based on everything we see right now, we are on pace to get there. Yeah. That being said, with you know all the challenging situation and fluid situation in the Middle East, if things are going to escalate in the future or before we are able to get fully caught up, we might have some delays. If things stay the way they are, no doubt we are gonna be able to complete the deliveries, and let's hope things stay this way, but if not, we might see some delays. Okay. And can you remind me on Ignite and OptimasMAX, what are the ASPs of those systems versus prior gen Optimas and prior gen BodyTite, FaceTite? The list price is slightly higher, around $5,000 more, not nothing- Yeah, would you put it probably 2%-4%, 2%-3%? Yeah. Yes, something like that. I'm not sure how much of that we'll be able to translate to increase in ASPs. But again, overall, we count on ASP to stay the same, especially in this economy. I'm not sure how much premium we can charge over the previous generation. Yeah. Yeah, Yeah, no, fair enough. And then, are COGS on those newer systems higher, lower than the previous? Pretty much the same. Okay. Pretty much the same. However, once we start with the upgrade program, it depends on how successful the upgrade program will be, maybe the gross margin, 'cause the ASP will be a little bit lower, the gross margin might take a small hit. Okay, fair enough. On the consumable side, you have talked about kind of increasing to some higher priced consumables. How does that play out over the next twelve or eighteen months? Is it just attaching more consumables to your devices or also premium priced consumables to your devices? Is it a volume, a price, or both kind of tailwind? It's both. Every device almost that we're bringing now to the market has consumables on it, so we'll have more devices in the field that uses consumables. That's always helpful. In addition, because of the improvement in technology in the new devices, for example, the new Morpheus tips that are able to support the Morpheus8 and Morpheus Burst technologies, they are more expensive, so we actually sell them for more, so the margins also are higher there, and we did increase pricing. To answer your question, yes, the pricing of the new tips with the new technology are higher, and we are gonna have more platforms and handpieces that require disposables in the field. Okay. Off those higher price points, you know, the counterintuitive part of your business is that your capital has always been that strong, 85% gross margins, and I think for a while anyway, your consumables were lower gross margin. They were gross margin diluted. Yes, and- Will they stay that way? Yes, and they'll still stay that way. We are not changing our business model. We are not moving to razor and razor blade business model. That's not the place. When I say disposables are higher, I mean 10% higher, 15% higher, nothing drastic. It's not like we're gonna change the business model anytime soon. Okay. You know, as I think about the next couple years, and obviously macro remains a wild card, and Israel remains a wild card from a manufacturing standpoint, all that. But, you know, in the past, kind of pre the big run you guys went on in 2021 when there were stimulus dollars and everybody was spending- Mm ... on these procedures and all that, you know, you used to talk about kind of adding $50 million incrementally- Yeah ... to the model each year in incremental revenue over the prior year. For a while, that ballooned up a little bit higher, then it came back down to $50 million. I think on the most recent call, Moshe kind of mentioned a lower number, and I don't remember if he said 30-40 or something like that of incremental. And maybe that's not right. Yeah. I'm trying to read your face, if I'm wrong on how I'm saying that. No, no, no. But I thought he made some comment. But I mean, how should we... I, I, I've always thought that kind of incremental revenue dollar target is a helpful way of thinking about at least internal expectations for you guys. Yeah, I think you're right. We used to be at $50 million up to 2021. Moving forward long term, I think $30-$40 is something that, you know, definitely doable. However, if you're specifically looking at 2025, I'm not sure if that will be the case. We need to see where the economy is going. We need to see how we end up Q4. This will give us a good indication what we believe 2025 would look like. With all the uncertainties, you know, we might even look at the flat in 2025. We don't know yet. It's too early to discuss that. Long term, yes, I think the $30-$40 million that you mentioned is definitely doable. You know, we have this somewhat so-called formula that we know that if we continue to introduce two new platforms every year, launch two new platforms every year, adding some sales teams, going direct in some territories, we can bring this incremental revenue. Okay. So in theory, yes. Yep, fair enough. And then, you know, as I think about what that translates to a growth standpoint, I'm trying to remind myself what your guidance is this year. Is it... What's your revenue guidance this year? Three- Four, four, forty-five. 4:30 to 4:40? Yes. Yeah. Mid-range is $435. Yeah. Okay. So, off that, we'd be talking about, you know, kind of a target maybe at some point, 2025 beyond, of getting back to kind of upper single-digit revenue growth. Is that a reasonable kind of- As I said, it's too early- Yeah ... to talk about 2025. We- No, no, no, and I'm not saying for 2025. I know you said- No, not 2025. ... that can even be flat. Over the next several years- Oh, yeah ... over a multiyear period, is that kind of what you're trying to message? Yes ... that maybe your longer-term growth potential is now kind of in that upper single-digit range? It might be. I think, you know, 30-40 million is maybe even less than that, but less than upper single digit. But yeah, I think that's why we don't like to talk about percentage. Yeah. We prefer to talk about absolute dollar numbers. Okay, fair enough. What level of growth then if we talk about, you know, upper single- to maybe mid-single-digit growth longer term? Yeah ... what kind of growth do you need to get to, you know, leverage in the model and margin expansion? I think that's what we need in order to add at least 2% every year, 1%-2% every year improvement. You know, we were at a 45% EBITDA margins or operating margins non-GAAP last year. Right now, we are estimated to be at 35%. Despite the headwinds, we decided not to cut down in cost, and we decided to take the hit in. Yeah ... in the margins. And we hope that we will slowly start climbing back. I'm not sure if we'll get to the 45%, but even 35% is a very- Do you feel like thirty-five is- It's a very nice- ... is maybe a base you can build off here? Yeah, I think so, yes. Okay. Probably adding 1%-2% every year as revenue improves. Okay, fair enough. Especially in North America. We need the revenue to improve in North America because it's the most profitable business for us- Yeah ... so territory for us. Okay, and then other uses of cash, obviously, you know, now you did the $150 million buyback. Yeah. You're doing the $100 million now. Let's say you lock in a $100 million a year or something like that, but you've got a lot more cash than that. Still any interest in acquisitions, or how else do you go out and use that cash? Yeah, no, absolutely. Acquisition is definitely one of the alternatives for the use of cash, and it's, in terms of priority, it's high up there. I think that would deliver, if done right, it can deliver better value to shareholders. We also have a dividend as an option. Once we see that, you know, for tax perspective, dividend and additional buyback are treated the same, maybe we decide to go on the, into the dividend route. Sure. There are some investors that suggesting that if we become a dividend company, we're definitely gonna get better multiples from where we are at right now, and it might make sense. So that's, that's- Yeah, I mean, especially I think with the- Yeah ... the growth profile you're talking forward- Yeah, yeah, yeah ... of the company. Yeah. Still a good margin. Yeah. It would screen better probably for value investors with the dividend, I think. Yeah, exactly. Yeah, that makes sense. So all the options are on the table. That's what we are trying to see. Sometimes we are opportunistic, just like with this buyback that we did today, and hopefully with some M&A opportunity that we might run into. All right. A couple questions I'd ask on that, but I'm gonna jump in at the last minute and a half. You know, you brought up last quarter something I don't think I've ever heard any of my companies talk about, which was, you know, some counterfeit systems you were seeing- Yeah ... out of China, not just in the Asian markets, but also in your European markets. You also seemed to suggest maybe seeing a little bit in North America. Yeah. I mean, you know, how big of a problem is this? How big of a concern should investors have on this? Are there things you can do to better ferret that out going forward? Just how to think about all that. It's something that started recently. We've noticed it more and more. We built a very strong brand name with the Morpheus, and you know, one of the price you pay for building such a strong brand name is that you have those counterfeit products from China that pretended to be Morpheus, and then they try to sell in the U.S. In Latin America, we see a lot of them and in Europe, so not only Asia. Yeah. We try to fight that in several ways because the impact on revenue might not be big, probably marginal, but the reputational damage can be critical here. Because patients are going and getting those treatments, and they think they got a Morpheus8 treatment done, when in fact it was not, and then if they are not happy, they go online and say, "Hey, look what Morpheus8 did to me. Yeah. While it was a fake product. Most of the U.S. doctors really responsible and want to protect their patients, but there are some med spas that use those counterfeit accounts. We are going legally after the manufacturers, after the platforms that allow them to sell it, and also some, after some of those med spa accounts that advertising- Yeah ... those fake accounts as Morpheus8. Okay, fair enough. Well, with that, our time is up. Yeah. So please join me in thanking Yair for a great overview here of InMode. And as a reminder, next presentation is set to begin at 2:35 P.M. Eastern Time, include Twist Bioscience. No, I think I'm off as I'm reading that, sorry. iRhythm Technologies, HealthEquity, Iovance Biotherapeutics, and Enanta Pharmaceuticals. Thank you. Thank you very much.