Okay, great. Thanks everybody for joining this session. I'm Matt Taylor, the U.S. medical supplies and devices analyst here at Jefferies, and I'm pleased to be joined by InMode management, including Yair Malca, outgoing CFO, and Moshik Itzkovich. Yes. Incoming CFO. Got through the first hurdle here with some help from my friends, and wanted to run through some fireside chat questions for this session. I'll start off just with a high-level one. Always want to do that to make sure that folks who are less familiar with the story understand where we're coming from. Could you talk a little bit about InMode from a high level? Maybe walk through some of the history and how the company's now evolving to move into new areas, and growth expectations for the different segments. Sure. InMode was established back in 2008, 2009. Got their first FDA approval for our technology, the RFAL, back in 2017. This is where we started to build our sales team and launched it in the U.S. and the rest of the world. We went public in 2019, basically introduced to the market, after that, the Morpheus8, which is one of our most recognizable brand. Lately, we introduced the QuantumRF, which is the latest RFAL technology. While doing mainly the aesthetic side and introducing the RFAL as opposed to the lasers, which traditionally has been in the industry, we also have a wellness segment where we go after women health, we go after ophthalmology, we go after, in the future, ENT, men health. Those have been same side or along the sides of the same company, the same thing. Working aesthetics and wellness. On every wellness device, we basically try and bring an aesthetic procedures so that we kind of combine those together. That's a quick overview of InMode's history. Great. The company is in a lot of cash pay areas, and talk a little bit about the pressures that have been on both the consumer and on physicians over the last couple years. I guess I'd love an update on where you think we are in terms of macro headwinds, and what would be sort of the key things that we would want to see turn to potentially enable better growth in the market and for InMode. Okay. From the consumer side, again, the U.S. has been, or the aesthetic worldwide is seeing a slowdown for the last couple of years. Oh, sorry. Can you repeat the question again? I want to make sure I capture all of it. Yeah. I just wanted kind of an update on those trends and whether you're seeing things stabilize, deteriorate, improve? Okay Sort of what would be some of the key things to watch out for to see how the market's evolving. Okay, sure. As I said, there was a slowdown in the last couple of years. We're seeing the market starting to flat out, and we hope that we reach the bottom. We see some encouraging signals from the toxin market, where we see BOTOX is starting to pick up, which is very encouraging because that has been also downtrending in the last couple of years. Last quarter, we've seen basically an uptick on those. We hope that we will see that as well in our industry, where our treatments are a little more expensive than the toxins. Toxins are in the hundreds of dollars. Our treatments are between $2,500-$5,000. We hope to see it trickle down to our industry or to our segment of the market in the next few quarters. Mm-hmm. Just to remind folks, some of your business is capital based, and so you've also talked about the rate pressures with rates increasing in the last couple of years. We're now seeing stability in rates. Is anything changing there? I know that you've talked about helping with financing. Are you thinking about doing things more flexibly or different to help customers with rate pressure? Well, there wasn't a decrease in the interest rate in North America and globally. That didn't trickle down to the physician or the aesthetics clinics or in the leases from the leasing companies. Yeah, we have some support that we do to our customers, and that stays the same as we've been doing in the last couple of years. I think it will take a while until we see this decreasing interest rate until it arrives to our industry. Yeah. On my end, I'll add just that in order to see a significant improvement in our business, those two things that Moshe mentioned needs to happen. We need to see the economy getting better, inflation get under control, so the Fed cuts more significantly the interest rate, so it has a significant impact on the leasing interest rate that our customers are signing for. Also, we need to see increase in demand by the patients. for aesthetic procedures. Those two things need to happen. This will make the physicians feel more comfortable getting themselves into, again, investing heavily in capital equipment into their business. This year, as Moshe mentioned, things are going to be flat compared to last year, which is a positive after two years of declining. Hopefully, the decline will stop this year, and we hope things will move to growth next year. You talked about the BOTOX trend. I've actually heard that from a couple folks. Is that typically a leading indicator, or is that something you view as a leading indicator for your business? What are the other things that you would look for to see signs of either stability or a positive turn? Well, when you look at that, you compete on the customer marginal dollar for a treatment. As the economy is maybe doing a little bit better and customer has more money, they're going to spend it on the lower prices. Again, that's our assumption. We hope that as the economy gets better, more money will be available for customers to spend into a more expensive treatment, that we are in that space. That's basically what we see here. In addition, there is the consumable spent that we do. The consumable, sorry, the consumable that we sell, we see some good momentum over there. It's too early to see on our side because it's still not there. Mm-hmm. You mentioned the flattish year. That's actually where the guide is for the revenue. Yes is about flattish for the year. It comes with some margin pressure. Could you illustrate what is changing on the margin side of things, and how should we expect going forward margins to progress? Okay. There are several factors that affects us on the margin currently. One is a split between selling the U.S. versus outside of the U.S. The other one, the product mix. We have the tariffs and freight. Regarding the U.S. and non-U.S. sales, our U.S. sales has declined slightly, and we have more sales in other parts of the world. In our industry, it's basically always has been that the U.S. has the best margins. The more sales we have outside of the U.S., and we'll see a little pressure on the gross margins. We also introduced lately two laser systems in the last couple of years, the CO2 and the Picofy. Wow. The Picofy. Those are traditional lasers which cost a lot more than our traditional RF platforms. Those are rather new, and we see some increase in sales of those compared to the RF. As any new product, our sales team is very excited to sell it. Once it aligns back to where it should be, we'll see maybe some adjustment on the gross margin there. The tariffs that has been there for a while also contributes to some pressure on the gross margin, between 1% and 2% maybe. Freight, with the oil pricing going up, our shipping to the product and shipments of those cost more, and again, will affect the gross margins. Overall, we hope that as we see the increase in sales in the U.S. as the economy gets better, and increasing the RF devices that we sell, we should see better margins. Understood. Maybe there's a couple follow-ups I could ask there. One is, I just wanted to call out, you have some presence in Israel. Maybe you could talk about how you're managing through the conflict in the Middle East. Has that had any impact? What are things that you can do to protect your business against disruption? At the moment, we don't feel the impact too much on our sales. Again, we manufacture in Israel. If you've seen our numbers, we've increased our inventory and the inventory that's currently outside of Israel. We didn't have, except for specific cases, a few delays. All in all, we're able to deliver the products to our customers in the same timeframe we usually do. I really think it's not really material. Mm-hmm. Looking back at the last two and a half years, right? Since October 2023, this region was in almost constant war situation. I think that was never our main problem when it come to delivering or executing on the business. It was the slow came from the demand side, not from the supply side. Yes, maybe in some scenarios we had several weeks with disruption to the operation and the manufacturing. Overall, I can tell you, looking back, that was not what impacting the business. I wanted to touch on, you mentioned the new lasers and products that you're bringing into the portfolio. I think some of that was leveraging your position with the customers and your contracting to sell a more full bag of products. Maybe expound on that. Is there potentially to take that a few steps further to go into other product areas? Could you speak to also just the lasers that you do sell today and how they're differentiated from competition? Well, the Picofy, which is pico laser, and the CO2 laser are not new technologies. They've been in the industry for a while now. Decades, probably. We are traditionally an RF-based company, and most of our products are RF. However, there is a demand for the lasers or for those lasers. We've decided to basically provide our customer the ability to buy their products directly from us instead of going through competitors. You have a trend of combination treatment where a physician will offer the customer do a Morpheus8 treatment but include resurfacing through a CO2, for example. We've seen some of our competitors actually swooping in after we sell a Morpheus8 device to sell the CO2. Why not sell both by us at the same time? That's basically it. Okay. The reasoning behind it, we need to see how it progresses as we sell those. If this becomes a bigger sell portion than we anticipate, then we'll make decisions then on that. You talked about in the beginning some specialized areas like women's health. You also now have an ophthalmology offering. One of the new changes that was made in the beginning of the year was to focus on that space with a specialized sales force, which is sort of a new approach for the organization. Can you talk about the rationale behind that and how that's going so far? Absolutely. Basically, we have a lot of products, and up until now, we had the same sales team selling everything. When you allow a sales rep to sell what he wants, he sells what he's comfortable with, he sells what's easy to sell. In order for us to grow in those markets, we need a specialized sales team to basically go and pursue that market and specialize in selling it. We chose Envision or the ophthalmology section as our test or as a segment that we can run with a direct sales team that can sell only that product and try and develop it even further. It's a bit too early to know how it is and how it's working. It's still at the beginning, there's some learning curve for that team on how to sell to ophthalmology, only to ophthalmologists and optometrists. I think within a quarter or two, we'll have some more information on how it works and if it has been successful or not. Okay. Overall, the direction is the right one. Bifurcating the sales team is the right way to go. We are experimenting with it at the moment. I'm not sure we have the solution of how exactly to do that, but at least we do have a team that exclusively sell Envision, which is our eye product, optometrist product. Exclusively, meaning they cannot sell aesthetic, and the aesthetic team cannot sell the ophthalmology product. That's a change we implemented earlier this year. Let's see how it goes. We need to make this successful, and we will. Once we finalize what exact way to do it, we probably implement it in other areas as well. Women health, we plan in the next year to bring an ENT device to the market. Whatever we learn here from this experiment would help us a lot when we move forward with additional products. Great. Maybe that's an opportunity to switch and talk about the pipeline a little bit. You mentioned ENT. What are some of the other products that you would point us to in your roadmap? Maybe expand on the ENT opportunity and talk about how big that could be. Okay. The ENT is something that will come in, I would say, in two years. I think it's a sizable opportunity. I think overall, we are looking about, want to say, 12,000 ENT doctors or practices in the U.S. It's a good size market. As with everything we do, we will include aesthetic hand pieces on the ENT platform. Initially, the ENT would focus on turbinate reduction procedures, and maybe we'll add some additional procedures to assist with snoring. At the same time, we are also continue to develop indication or get indication on the women health side. OAB is a big one. We are conducting a fairly big study for us. It cost millions of dollars over the course of a few years to see if we can get an indication for overactive bladder. That's going to be a huge market, obviously. We don't forget aesthetic for a second. We are planning to launch later this year the Morpheus8 Cool, the next generation. It's called Morpheus8 MAX, the next generation of Morpheus8. Morpheus8, as Moshe mentioned, was one of our strongest product in the history of the company, and I think the next generation Morpheus is a big one. I think Moshe mentioned that we are going to launch it together with an erbium laser on the same device. This would help providers Provide patients with a complete solution. Go deep with the Morpheus8, painless. With the new Morpheus8, it's going to be painless. Top it off with a resurfacing using an erbium laser. I think that combination would be an amazing one. Got you. Dan, just to be specific on the OAB timeline, where are you in the progress of that study, and when could we see some data? We are just in the site selection phase. It's going to take at least a year and a half until we can talk about some data. At least a year, let's say. Okay. I also wanted to just address this issue of GLP-1s in aesthetics and how that impacts your business. Seems to me, just to remind folks, that you have solutions that can help with fat reduction, with lipolysis. Your real calling card's been skin tightening. I'd imagine there's some push and pull there, but maybe talk about how that's evolved, the demand, and how you approach the market given that trend. Sure. We compete with the GLP-1 on the marginal dollar from the customers. Right now, customers are going through those treatments, and we see maybe one of the reasons we see less demand to our products. However, you have what's called Ozempic face, which is what happens after you go on those GLP-1s, and you have sagging of the skin, which where our products can be complementary to it. We haven't seen it significantly yet, and you've seen how our numbers have been in the last year with the entire industry. We're hoping that there will be a synergy over there, going after the GLP-1s, and help tighten the skin and fix those side effects of the quick fat loss, weight loss. GLP-1 doesn't improve or doesn't do anything to the skin, to the quality of the skin. It kills fat. Killing fat, in our space, it's fairly easy. Fat cells are cells that are, again, fairly easy to kill. Contracting the skin, contracting soft tissue, this is something more unique, and that's something that the GLP-1 cannot do, and this is where our procedures can help, as Moshe mentioned. I don't want to tie InMode to the GLP-1 craze or phenomena, but we definitely don't look at it as a headwind long term. If anything, it might be a tailwind, but we don't want to count on that as well. At the end of the day, it's two different things. We are treating the skin, and GLP-1's just killing fat cells. The problem with GLP-1 is that when you lose so much fat so quickly, the skin is unable to contract properly, and this is where we can help ultimately, and hopefully, we will see it in the numbers soon. Got you. You need a GLP-1 recovery package. Yeah that you can together. Some providers already, when they start putting their patients on GLP-1, we see it today, a lot of med spas and aesthetic providers putting their patients on GLP-1 as the first line of defense, first line of treatment. First, we'll put you on GLP-1. We'll see how you look like after, and then we start treat based on the results. I believe personally, that if the GLP-1 would not help the doctor increase their business, they would not offer it so quickly to their patients. They also see the GLP-1 as one of the tools in the tool bag when they come to offer aesthetic procedures to their patients. They start with that, and then they move on to our procedures. Mm-hmm. Got you. I wanted to follow up on the Morpheus8 Cool. because you seemed excited about this. Maybe just explain what that is, what it offers over and above the current generation of Morpheus. We don't want to provide too much details before the official launch. It's going to happen later this year. We're going to keep all the details until we launch it. Again, I'm excited about it because I actually tried it on myself three times already, and I can't wait for this product to launch officially soon. Right. Most people don't know yet, Yair is 92 years old. It looks good. Going back to the guidance, I wanted to talk about what you think about that could really drive you to the upside or above the guidance or the downside or below. What are the main factors for this year that could really swing the guidance one way or the other? Well, basically, the economy is what's going to drive it. As I said, we've seen some flattening, we've seen some improvement. At the end of the day, we're part of the aesthetic industry. The aesthetic industry is not doing well up until the last two and a half years. We see some improvements. We're very optimistic. We need to see that this improvement is consistent and affects us as well. Yair, you have anything else? Yeah. I think Q1 was a good start for the year for us. Q1 is the first quarter and the slowest quarter of the year, so we don't want to make too much out of it. We want to see how Q2 would look like. I think in terms of what we believe, if things stay the same, we probably will be flat on revenue year-over-year. We continue to make investment. We continue to open subsidiaries. We bifurcated the system in North America. All those investments cost money, that's one of the reason why you see the declining in margins. At the end of the day, I look at it as investment. We are investing, yes, we are spending the money. We are not expecting to grow this year, but these are the foundation that we put now out there that would help us with growing once the economy recover. Upside and downsides, obviously, if there will be a downshift in the economy, we will have a downside to the guidance. Upside might be a more successful launch to the Morpheus8 MAX than we expect. Okay, great. With the few minutes that we have left, I wanted to talk a little bit about capital allocation, M&A, and share repurchase. The last few years, there's been some big share repurchases that the company has made and taking advantage of that up to a point where the kind of tax kicks in. How are you thinking about M&A versus share repurchase from here, and what areas are interesting in terms of white spaces that you could acquire into? Well, on the share repurchase, we have a program right now that we've announced it, and that runs. Regarding M&A, all options are on the table, where we review all kinds of ways to bring shareholder value through M&A, through share purchases, through everything else. At the moment, Yair, I don't think we have anything specific. On the M&A front, nothing specific, but we are always looking, and many companies and banks looking at our balance sheet and see the huge cash balance, so they tend to run opportunities by us. I think for, personally if you're asking me, going after smaller companies in the women health space, ophthalmology space, one of the new space that we are trying to penetrate, I think that can accelerate our penetration. That makes a lot of sense in my mind. Creating those divisions for women health, ophthalmology, ENT, et cetera, by acquisition might accelerate our growth. On the buyback, I would also add, we don't have anything against buyback, unlike what some investors might think. We spent well over half a billion dollars on buyback in the last few years. We don't see any sign of stopping. We even have announced a plan this year. I can tell you that the board is truly evaluating all options, either to do even a more significant buyback with some tax consequences for that's fine. Some investors say that even with the tax, this is still an attractive price to go and buy back shares in the market. We also have the options of dividend. You know that the board was actually examining some strategic transactions as well. It's not like we are saying just to say that. All the options are really on the table, and we are evaluating all of them. Maybe just on that last point, just remind us, there was a strategic review, which was recently closed. There were some announcements in the media that there were offers for the company. What happened and how did that process conclude? Yeah. I cannot comment on the articles in the media, but overall, the board mentioned that they formed a committee, a special committee, only with the independent board members. They engaged with a major investment bank to see if they can provide value to shareholders in a way of a strategic transaction. It was an extensive and serious process, I can tell you that. At the end, the management did not have access to or visibility to the offers that were received, but the board decided that the offers were not good enough in a way that they believe will maximize the value to the shareholders, and they decided to end the transaction, end the process. Great. I think we have to end there, but thank you