Good morning. Thanks for joining us again at the 25th Annual Needham Healthcare Conference. I'm Mike Matson, and I lead the MedTech and Diagnostics Equity Research team at Needham & Company. I'm pleased to introduce InMode's CEO, Moshe Mizrahy, and CFO, Yair Malca. Instead of a standard presentation, we are going to do a Q&A or fireside session. If you do have questions you'd like me to ask, you can submit them electronically through the Needham conference website, or you can also email them to me at mmatson@needhamco.com and I'll try to fit them in. With that, we're going to go into the questions here. InMode pre-announced this morning. The numbers look pretty good. I think you grew around 5% year-over-year. I just wanted to see if there are any kind of one-off items, either positive or negative, that you wanted to call out in terms of the first quarter. Given that you did grow mid-single digits here, is it possible that we could see a return to positive growth for InMode overall in 2026? Well, the guidance that we gave for 2026, it's about the same guidance we gave for 2025. We believe that the numbers will be almost the same. The fact that we are a little bit better than the first quarter of last year, they're not much. I mean, 5% you said, yes, 5%. Overall, we believe that 2026 will not bring us to a new level, let's say growth of $20 million-$30 million. If we will do good on the second quarter, we might update the guidance. Right now, we don't see any reason for that. Okay. Just can you shed a little more light on what you saw in the quarter in terms of the different product categories and geographies? Was there any strength in any one region or product category? Well, this quarter, we brought to the market a new product, which is the Picofy. It's a picolaser, mainly in the United States, in North America. No, in the US, because they don't have the regulation yet from Canada. And we are slowly bringing this product into the European market and to the Asian market. That will happen in the second quarter. I believe that the growth of about $4 million or $5 million this quarter came from basically this new product, which we're not making internally. We buy it. We buy it from a Korean company. And therefore, the gross margin on this product, it's a little bit less than what we're experiencing, and you can see it on the total gross margin that we're showing. All the other products, the Optimas Max and the IgniteRF, I would say, we sold about the same as in Q4 2025 and Q3. I read your question letter. We don't see yet some kind of momentum in the aesthetic market. No, not in our business yet. Okay. We sell about the same number of disposable, 200,000 or 210,000. I mean, we have the same number for a few quarters right now. What that mean? That mean that although we're adding more devices to the market with disposable part of it, on the other hand, probably there are some devices who are getting out of the market. Overall, although we have about 32,000 systems installed, we believe that the system that in operation are about, I would say, 16,000-17,000 systems, about half. On one hand, we're adding system to the market with some of them with disposable. By the way, the laser is without disposable because laser has no disposable. On the other side, we'll probably see doctors who are not upgrading their system and maybe they are using less disposable. Otherwise, the disposable should have grown, and it's not growing yet. Therefore, although maybe your study show that aesthetic treatment are now reviving, we don't see it yet. Okay. All right. I want to move on to some of the macro topics. Last year, I think this time of the year, I was asking you about tariffs. This year, we've got the war going on in Iran. Given that you have extensive operations in Israel, maybe you can give us an update on how the war is affecting InMode. I was curious around the first quarter pre-announcement. You were still able to grow 5%, so was there any sort of impact in the first quarter? I guess actually the war started at the end of March, now that I think about it. It probably wouldn't have had a huge impact in the first quarter. Well, I would say that we did not suffer much from the war. Although we're on the northern part of Israel, and we had some issues with Lebanon, not just with Iran, as you probably know, but the operation and the manufacturing worked smoothly. Although we had some issues with shipping because there was not enough flight out of Israel, but we kept a lot of inventory in the subsidiaries, and we moved product from one country to another just to fill the gap. Overall, regarding our revenue recognition, revenue, and sales, the war did not affect InMode in the first quarter. The war was about 40 days. Now we have a ceasefire, but you never know. It can start any day again. It all depend on your President, not on Israel. Right now business is working smoothly, the operation, the manufacturing. We managed to get all the parts and the subsystems, and also to ship on time. Okay. The first quarter didn't have much of an impact, but it was kind of at the very end of the quarter. Looking into the second quarter and the rest of the year, it sounds like you're kind of managing through, and it's not having a huge impact on the business. Is that a fair summary? I would say if the war will not start again, which I believe it will not start again because everybody is tired from this war, I believe it will not affect the business. Okay. Got it. What about just oil costs? That's kind of a secondary effect, aside from being directly affected because of your location. Is there any kind of margin impact from the higher oil costs from freight and things like that? Well, the only way for the oil to affect our business is on logistics and shipping cost, which this quarter was a little bit higher, at least in the last month, in March, was a little bit higher than the regular. I would say it's not a raw material for us. Yeah. We're not depending on the oil price. Sure. Component, no. Although there is some increase on component prices because of the inflation, but you cannot relate them to the oil price. Okay. Yes. As you can see, the gross profit is going down. We used to be 85%, now it's 75%, and this is mainly because, in this time of the year or in this time of the industry, it's very difficult to raise prices, although we tried around 5%. The cost of manufacturing, the labor cost, the sales cost, the shipping cost, everything is higher on cost, and therefore the gross margin is much lower than when we used to be. Second, as we started to sell laser product, laser is not something unique. Laser, I don't want to say commodity, but everybody has laser, and the competition is tough. We're not unique on laser like we're unique on IgniteRF or QuantumRF. Pico laser, all of our competitors has some kind of a pico laser, and the competition is on price. Even if we'll sell a Pico laser for $140,000, to buy it landed in the United States costs us $45,000. We cannot exercise, we cannot show more than 65%-70% gross margin. Therefore, when the gross margin is coming down, the net profit is also coming down, then the operating profit is also coming down. Today, as the competition increase, especially on laser product, we have to pay a little bit more and need to hire more people in order to maintain the same level of sales, which is also affect the operational profit. That's the industry. I don't think the industry is back to normal again. We're still suffering from the high interest rate, and some other element that, wars, et cetera, that affect us. We're still cash positive. We're still making money, and we're waiting to see when the light at the end of the tunnel will come. Okay. Yeah. Putting aside the kind of shorter-term challenges related to the war itself, it sounds like you're not seeing some kind of underlying improvement in the demand environment, given interest rates are still high, financing's still kind of challenging, and that's not necessarily driven by the war. It's more of just the world we've been living in in the past couple of years. Yes. Okay. It's not driven by the war. All right. The FDA issued a safety communication about RF microneedling last October. What is your take on that, and to what degree has that affected InMode and demand for Morpheus8, either from the physicians themselves or the procedures from the patients? Well, you know the FDA, every once in a while, they come up with some kind of public announcement that vaginal rejuvenation is not good and microneedling is not good. Like any other company, we're making microneedling, which is the Morpheus8. I would say that Morpheus8 is not microneedling. It's a little bit different, safer. We answer the FDA request, how many adverse effect we had, what kind of adverse effect on the last three years, including the statistics and everything. We send it to the FDA, and we did not hear back from them. I assume that we're okay as far as the Morpheus8. Of course, we explained the doctors and all of our customers what are the difference between microneedling and Morpheus8, and I believe the Morpheus8 utilization did not affected very heavily because of this announcement by the FDA. Okay. Got it. I want to ask some product-related questions. I think your installed base, you referred to this earlier, but about 13,000 in the U.S., 18,000 outside the U.S., over 30,000 globally. How penetrated do you think the markets are currently with your existing platforms? How confident are you that the markets, there's still these greenfield opportunities to place more systems versus just a replacement market, replacing older systems that have broken down or just outdated? Well, it's very difficult to calculate market share because there is so many different segment of the market, plastic surgeon, dermatologist, aesthetic surgeon, medical spas, and each one of those segment are using different type of equipment. Overall, our portfolio today, it's very wide. We have the unique RF Morpheus8, minimally invasive, but we're also expanding into CO2 laser, now Pico laser. We have a diode laser. Sometime this year, at the end of the year, we will come up with Erbium laser. Actually, we are completing the product portfolio, so we will have every type of medical aesthetic devices that we can go to different segment. Altogether, in the United States, I would say there are at least 150 aesthetic clinics. Doesn't have to be plastic surgeon, of course. It can be medical spa that the doctor operate as part of his clinic or a regular medical spa. We sold, what, 13,000. I believe that we have way to go. Each one of those clinic has at least one laser equipment. I believe at the end of the day, they will need some RF equipment. This is our competitive advantage on the bipolar RF business, minimally invasive and non-invasive. We don't feel that the market is saturated yet. Yeah. Therefore, to ask whether we are reaching the glass ceiling of the potential customers, we're not there yet, and in other countries as well. 30,000 out of I don't know how many clinics which are dealing with aesthetic worldwide, I don't know. Just in Korea, there are about, this is a small country, there are 75,000 doors and clinics who are giving aesthetic treatment. China and the Middle East and Dubai and Russia, there are big potential yet. Yeah. Sorry, just to clarify, you said 150 in the U.S. You mean 150,000 potential clinics that you could sell to. Is that what you're getting at? Yes. 150,000. 150,000 clinics who are dealing with medical aesthetic, yes. Okay. Yeah. I just didn't hear the thousand part, so I just want to make sure I was understanding that correctly. Okay. In 2025, you launched the Solaria CO2 laser as well as your ApexRF Urology system. Can you give a quick overview of the products and explain where they're used and how they fit with the other products you're offering? Again, Solaria, it's a CO2 laser, which we buy from a U.S. manufacturer. We don't make it. A Connecticut-based company. We buy and sell it under InMode name. We made few changes in the design and the service procedures, but we buy it. I believe so far, we sold around 200 systems. Probably in 2026, we will sell another 100. At the end of the day, I will say saturation because we are the only one. We're not the only one with CO2. I would say that any medical aesthetic company today, laser-based company, they have CO2, all of them. If we will sell all together in North America 400, we will be happy. With the ApexRF, we're selling it now without FDA approval. Therefore, we cannot claim erectile dysfunction. We're claiming what the FDA gave us on the handpiece, which is blood circulation and collagen building, which are basically the two elements that help the improvement of erection. We're showing it in different workshop, and we're training doctors with that. The price for this system is not very high. It's $65,000-$67,000 because it's a simple RF device. We sold quite a few. I don't recall the exact number, but it's going well. Does the ApexRF. We're just introducing it in the other part of the world. At that price point, I know with your ophthalmology and your gynecology systems, they also have aesthetic capabilities in addition to the dry eye and the vaginal features. Does this also have those more aesthetic capabilities, or is it purely just focused on this blood flow in erectile dysfunction? Well, we can add a Morpheus8 on ApexRF for doctors who want that as an upgrade. It's the same we're doing with Envision for dry eye and periorbital wrinkles and full-face rejuvenation, pigmented lesion, vascular lesion. Most doctors who are buying the ApexRF, I believe, don't buy it for the Morpheus8. Yeah Most of them already has Morpheus8. Sure. What are you seeing as you get into these other specialties? The gynecology, it seems to make a lot of sense because their customers are women, and women are probably bigger users of aesthetics or bigger consumers of aesthetics generally. When you get into ophthalmology and urology, what are you seeing in terms of their willingness to adopt aesthetic procedures beyond kind of the more specialty-focused things in medical treatments that you're offering? Well, we see a big potential in women health. The main two indication today for women wellness is urinary incontinence and overactive bladder. We're now studying it. We started a study, which we would like to bring to the FDA on overactive bladder. It's something like 10 different site, most of them university site. We submitted IDE to the FDA to approve the protocol, and they did, and we're starting the study. It takes time. I would say that this study probably will take a year, and the follow-up will be six months plus a year. If we manage to prove that we can do with Morpheus8 V improvement on overactive bladder and urinary incontinence, then it's another indication that it will be very unique for women health and women wellness. We don't expect that to be on the market, I don't know, before the end of 2027. Okay. Similar question on the ApexRF. What's the plan there in terms of getting an actual ED clearance from the FDA? Do you guys think they have to run some sort of study, and what's the timing on that? Are you even planning to actually pursue that or just kind of selling it under the existing labeling? Well, with the ApexRF, it's different because there was no predicate device using RF to treat erectile dysfunction. Therefore, what we did, the first thing we did, we contracted with some important luminary doctor, like Dr. Mohit Khera, who is the most, I would say, important luminary and doctor for erectile dysfunction. He's doing a study for us right now. If the study will be successful, and we will feel like we have enough preclinical information to go to the FDA and apply for a 510(k) de Novo to do an FDA-approved study under IDE, then we will do it. That's something that will happen only in 2027, not in 2026. Okay, I understand. I think this year you've got a couple new products as well that you're planning. Maybe you've already launched, because you talked about Pico. Pico laser, and then you have the Morpheus8 with the Erbium laser capability. As a lay person, I'm not sure completely. You've got the CO2 laser, you've got the Pico laser, and then you've got this Erbium laser. They're all lasers, but can you maybe talk about where they're used and what the differences are? Okay. It's a different indication. Pico laser, it's a very short pulse of energy. It's like 300 picosecond. You know what is pico? Small It is -12 degrees. It's crazy. Yeah. You cannot imagine how fast it's going. This is mainly for tattoos, to remove tattoos, to remove a deep pigmented lesion, for melasma on the face, things that are very unique for Pico. Pico is a very expensive piece of equipment. CO2 is more for skin rejuvenation, is a fractional laser, which is ablative. The difference between ablative and non-ablative, I'm sure you understand. The Morpheus8 combined with laser, either with CO2 or with other laser, is mainly for wrinkles. It's a different indication and different treatment. Although you're right, CO2 and maybe Q-switched, and maybe sounds the same, but doctor knows where to use what. Yeah. Okay. Pico, I guess you're already selling that it sounds like. What about the Morpheus8 with Erbium? Has that been launched or is that going to be launched later this year? It's not launched yet. We don't have the FDA. For the Morpheus8, we do. The fact that we added cooling, you don't need to go to the FDA. The second part of this system is Erbium YAG, which is another laser. We don't have an FDA yet. We need to submit to the FDA. We're preparing it. I believe that sometime in the second quarter, we will submit that to the FDA. Usually you need to take about six months between submission and clearance. Sometime on the fourth quarter, we believe we'll bring it to the market. Okay, got it. I know we already talked a little bit about EmpowerRF and Envision, but it's been a few years now since you launched those, so maybe you could give us an update. Are those still contributing to growth? Are those kind of flattened out here? Well, right now, EmpowerRF and Envision are relatively flat. Each one of them is about, I would say, 50 system per quarter, more or less, ±10% or something like that. The Envision, we did something special this year, and we would like to grow the Envision. We separated the sales team. We have a new 33 sales rep who was selling only Envision. Later they will sell, also ApexRF and EmpowerRF, but to doctors, not to any aesthetic doctor, to doctors, urologists, urogynecologists, and men's doctor, andrologists, if you can call him this way. That's the first time we separated that into what we call the new medical division, what we are trying to build. This quarter, we did the Envision, and we hope to continue with that, hopefully this year with another project. Okay, got it. The dry eye clearance, where do things stand with that in terms of the trial? Oh, okay. Again, the dry eye with RF, there was no predicate device. Therefore, we needed to go to the FDA and with a request to do 510(k) De Novo. That's a longer time than a regular 510(k). I believe, two weeks ago, we submitted the final animal testing that we did for safety on rabbit, with the RF on the eyes to show that it's safe. The results were perfect. The FDA accepted that as a safety feature, and that we keep the temperature under 42 degrees. We made it with a special lab in the United States, the first time that we did safety on animals. We hope that the FDA will approve the study and the protocol so we can start sometime toward the end of the second quarter. Okay. All right. Just a few on the international business. I think you're selling in over 100 countries. Are there any plans to enter additional countries? I'd imagine you're in kind of all the major countries already. Listen, it's very nice to say we're selling in 100 countries, but it's always 20/80. 20% of our sales today are coming from our subsidiaries, which are five in Europe, four in Asia, one in Latin America, and two in North America. 5 + 4 now + 2, about 12 subsidiaries. Okay? We're selling direct in 20 countries because in Europe, some of the subsidiaries responsible for other countries. France are responsible for Belgium, and Germany are responsible for Austria. 20 out of the 100 countries, this is about 80% of our revenue, and all the rest is 20%. You can play with it. It's very nice to say we're selling in 100 countries, but 80% of the business and where we spend money on marketing and we bring new product is 20 countries, not more than that. Yeah. The other 80 countries, are just the markets too small, or over time, can you go directly to those countries and build a business? No. Some of them, the market is not small, for example, Korea, for example, Russia, for example, China, for example, Brazil. There are some countries out of those 80 which are not small. We cannot establish subsidiary in every country. It's management time, it's management attention. We basically are doing one every year. Last year, we did Thailand and Argentina. This year, we're doing for the spa market in China, and I don't know what will happen next year. We didn't think about it yet. You cannot go and establish five subsidiaries in one year. Yeah. This is. It's a lot of work. I'm not saying complicated, but it's not something that... I'm right now basically in Madrid. This is our subsidiaries. They did very well this quarter. So I'm doing in one week, one day Italy, one day Spain, tomorrow I'm in France, and then Germany, and then U.K., London, and I'm flying back home on Friday night. It's crazy. But try to imagine if I need to do it how many times a year. So from a management point of view, just because we're in Israelis, if we had a headquarter in the U.K., let's say in Europe, then we can expand our business direct. But right now, all the R&D, all the manufacturing, all the logistics, it's all done in Israel. And Israel, it's a complicated country, I would say. Yeah. Okay. All right. Just China specifically, you mentioned, maybe just give us an update there. It's such a huge market. You said you're going direct there, I think, or partnering? To which country? China. Yes. China, we want to start direct into their more beauty market. China is divided between beauty and doctors and hospitals. Right now, the biggest market in China is the beauty market, which are less expensive system, but there are big chains that you can sell. We hire a specialist, somebody who are expert in this in China. We're building a company probably in Beijing or Guangzhou, which will be held by an Hong Kong company. We want to start doing direct there. A few years ago during the COVID time, we started a company in Guangzhou, in order to go to the medical market. The market was closed for two years, so we gave up on that and went to other market. Right now, we want to go back to China. Okay. All right. Just a few financial questions to wrap things up here. The gross margin, Moshe, I think you've kind of already talked about this a little bit at the beginning, but it has fallen a fair bit. Maybe talk about what's driven the decline and kind of what the outlook is from here. I know you've got the Pico and the CO2, which I guess they're coming from third party, so probably a negative mix effect there, and sounds like pricing's a bit challenging these days. Can we expect it to level off in the mid-70s% here or high 70s%, or is it going to keep going down from here in the shorter term? Gross margin, sorry. I believe that right now, the guidance is 75%-76%. That's already take into account the tariff which we're paying right now, until, I don't know, until something will happen. We heard that the court decided not to apply the tariff, but the customs is still charging the tariff. Maybe we'll get some money back in the future, but right now we're paying it. Of course, the fact that we're buying system and not manufacturing, as this part of the business will grow, it will affect the gross margin. Keeping the 75%, I assume it's something that we can achieve. Okay. All right. The other trend that I noticed is that both sales and marketing and R&D have moved up a bit in terms of percent sales. Can you maybe talk about what's driven those things higher? Is it just inflation or is there something else happening, like with sales and marketing, you're hiring more reps? It's mainly the overactive bladder study, which cost us $4 million. Okay. It's added some money per quarter because this started already few months ago and is affecting the total R&D. On the G&A, I don't think we will see a big change except one-time cost that cost us to do the project that the board tried to sell the company. That cost us a lot of money, but that's one time. All right. Since you brought up the strategic evaluation that you did, you went through the process, came back and said you didn't find something that was adequate in the interest of the company. Can you share any more details around that? I assume that there were potential buyers, but there just was a differential in what they were willing to pay versus what you think the company's worth. I mean, is it as simple as that? Well, I believe Bank of America did a very lousy job. I don't know. They were hired by the Board of Directors, not by us. I was very, I would say, surprised because Bank of America does not cover us, even. They don't know the company. They started with 71 groups that showed some interest. We signed about 34 NDA. I made presentation to about 12 groups and fund. We had a full due diligence with them in writing, in Zooms, et cetera, out of which four gave preliminary offer, and at the end, there were two, but the price that they gave was not satisfactory to the Board. Okay. All right. Just the balance sheet. You still have a lot of cash, no debt. I think you've recently announced you're going to buy back another 10% of your share count, or a new share repurchase authorization, sorry. Maybe just give us an update on capital allocation and why that 10% is kind of a limit any given year, 10% of outstanding shares. The Israeli [IOS] allow you to buy back 10% of the stock without paying dividend tax. We try to eliminate dividend tax. Therefore, every year we do 10% buyback. Although, overall, we did, I don't know, about already 40% of the stocks we bought back or even more than that. We spent, before we started this 10%, $508 million in buyback, and now another, I would say, it would be between $90 million-$100 million around. I don't know what prices will be the average. 60% of the profit went to buyback, but the stock did not change. Maybe I'm a minority in this company, and I'm not always for a buyback because I don't see any effect on that. The shareholders want us to do a buyback, and right now we're not buying any company and not doing any M&A. I mean, we need to allocate capital back to the shareholders, and that's the only way to do it is through a buyback. Yeah. I mean, your EPS certainly would've benefited from it, I think, over the years. I mean, it must be higher than it otherwise would've been, but okay. All right. Thank you. We're at the 40-minute mark, so I think we're going to have to wrap up there, but thank you, guys. I appreciate it. Thank you very much. Thank you.