Earnings call transcript: InMode Q4 2024 results miss forecasts

InMode Ltd (NASDAQ:INMD) reported its financial results for the fourth quarter of 2024, revealing a shortfall in both earnings and revenue compared to market expectations. The company’s earnings per share (EPS) came in at $0.42, falling short of the forecasted $0.59. Revenue for the quarter was $97.85 million, below the anticipated $114.23 million. Despite these misses, InMode’s stock saw a modest increase of 2.83% in pre-market trading, closing at $17.50. According to InvestingPro data, the company maintains excellent financial health with an overall score of 3.28 (rated as "GREAT"), supported by strong profitability metrics and robust cash flow generation.

Key Takeaways

• InMode’s Q4 2024 EPS and revenue fell short of market expectations.
• The company’s stock rose by 2.83% despite the earnings miss.
• Full-year 2024 revenue decreased by 20% compared to 2023.
• Launch of new products and management changes were highlighted.
• The company maintains a strong position in the aesthetic market.

Company Performance

InMode reported a challenging fourth quarter, with revenue of $97.9 million, marking a significant decline compared to previous expectations. The full-year 2024 revenue was $394.8 million, a 20% decrease from the previous year. Despite these setbacks, the company continues to lead in the aesthetic market, supported by its extensive product portfolio and strong R&D focus.

Financial Highlights

• Revenue: $97.9 million in Q4 2024, down from $114.23 million forecasted.
• Full-year revenue: $394.8 million, a 20% decrease from 2023.
• GAAP diluted EPS: $1.14 for Q4, $2.25 for the full year.
• Non-GAAP diluted EPS: $0.42 for Q4, $1.76 for the full year.
• Gross margin: 79% GAAP, 80% non-GAAP.

Earnings vs. Forecast

InMode’s Q4 earnings per share of $0.42 missed the forecasted $0.59 by approximately 28.8%. Revenue also fell short, coming in at $97.85 million against the expected $114.23 million. This marks a notable deviation from the company’s historical performance, where it has often met or exceeded market expectations.

Market Reaction

Despite the earnings miss, InMode’s stock price experienced a 2.83% increase in pre-market trading. The stock’s performance remains within its 52-week range, with a low of $14.87 and a high of $26.80. The positive stock movement suggests investor confidence in the company’s long-term prospects, possibly driven by new product launches and strategic changes. InvestingPro analysis indicates the stock is currently undervalued, trading at an attractive P/E ratio of 7.8x and EV/EBITDA of 5.8x. The company’s impressive 80.3% gross margin and strong cash position relative to debt further support its investment case. Discover more detailed valuation insights and 8 additional ProTips with an InvestingPro subscription.

Outlook & Guidance

For 2025, InMode has set a revenue guidance range of $395-405 million, with a non-GAAP EPS of $1.95-$1.99. The company plans to launch new products, including the Fractional Laser CO2 platform, and anticipates a return to traditional quarterly seasonality. Analyst consensus gathered by InvestingPro shows mixed sentiment, with price targets ranging from $16 to $29, though four analysts have recently revised their earnings expectations downward. Access the comprehensive Pro Research Report, available for INMD and 1,400+ other US stocks, for expert analysis and deeper insights into the company’s prospects.

Executive Commentary

CEO Moshe Mihrafi expressed cautious optimism, stating, "We do hope that 2025 will be a better year than 2024." He also acknowledged the current challenges, saying, "We don’t see the light at the end of the tunnel, unfortunately." Despite these hurdles, Mihrafi remains confident in the company’s operations and market position.

Risks and Challenges

• Decreased demand for minimally invasive procedures, down 20-25%.
• High interest rates (12-14%) affecting equipment leasing.
• Macroeconomic challenges impacting international sales.
• Supply chain risks, although mitigated by multiple suppliers.
• Potential market saturation and replacement cycle for older systems.

Q&A

During the earnings call, analysts inquired about the company’s capital allocation strategies and the potential replacement cycle for older systems. InMode is exploring various strategies to optimize its operations and mitigate supply chain risks.

Full transcript - InMode Ltd (INMD) Q4 2024:

Conference Operator: Good day, and welcome to the INMODE’s Fourth Quarter and Full Year twenty twenty four Earnings Results Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Mary Segal, CEO of MSIR, to review the safe harbor statement for today’s call. Please go ahead.

Mary Segal, CEO of MSIR, MSIR: Thank you, operator, and to everyone for joining us today. Welcome to Inland’s fourth quarter and full year twenty twenty four 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 release also pertains to this call. If you have not received a copy of the release, please visit 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 those expressed in 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. With that, I’d like to turn the call over to Moshe Mihrafi, InMode’s CEO. Moshe, please go ahead.

Moshe Mihrafi, CEO, InMode: Thank you, Mimi, and to everyone for joining us. With me today are Doctor. Michael Kreindel, our Co Founder and Chief Technology Officer Yaira Malka, our CFO and Rafael Likerman, our VP of Finance. Following our prepared remarks, we will all be available to answer your questions. The fourth quarter of twenty twenty two was indeed challenging for InMode, as we navigate intense headwinds in the aesthetic industry, which were compounded by broader macroeconomics factor.

Despite this optical, we stayed focused and productive in 2024, driving innovation and maintaining a strong emphasis on R and D. We launched two new platforms in 2024, the IgniteRF and Optimus Max, which are both breakthrough technology. Though it took longer to reach the market due to the extended training cycle and increased complexity of the tools and the manufacturing line. Now that the delivery challenges are behind us, we are optimistic that these platforms will see better adoption in 2025. The IgniteOS platforms provide a comprehensive range of radio frequency solution to address a variety of aesthetic and surgical needs.

At the heart of the platform is the quantum RF end piece, a breakthrough technology that deliver RF energy to deeper tissue layers, achieving remarkable results while maintaining a minimally invasive approach. As we previously mentioned, the Ignite RF is an upgrade from our popular of our popular body type platforms and it feature nine advanced technology that facilitate soft tissue contraction at multiple tissue depth for optimal outcomes. I would like to provide some colors on the second platforms, the Optimus Max. It is a versatile multi application platforms that deliver more energy and superior heat distribution, resulting in fast, more efficient results. Since Tyme is one of the doctor most valuable assets, our solution allows physician to perform more treatment per day, which translate to seeing a higher numbers of patients.

Both platforms are still in the early stage of revenue, but early feedback from doctors worldwide has been positive. We hope that we can update about our progress in the coming quarters. As you may know, InMode has long history of leading the industry in innovation and pioneer across several technologies. We have maintained our leadership position in the aesthetic market with continuously introducing new and exciting technology and platforms. In fact, in 2025, we plan to launch two new platforms, the fractional laser CO2 and another platforms for the medical market.

We will be able to share more information as we approach the launch. Our fractional laser CO2 platforms focus on the popular facial rejuvenation and resurfacing market. And when added to our Morpheus technology, the patients receive noticeable results and smoother and more youthful skin results with a minimal downtime. Since physician like to bundle the Morpheus treatment with the CO2 laser, we expect this FDA approved technology to gain more traction later this year. As a result of our extensive portfolio and innovative product, compound with our streamline organization structure, aligned with expansion strategy, IMOD is well positioned to continue our leading market position, generate superior margin and benefit once condition will recover.

We are confident in our operation and the ability to meet the demand. We have long relationship with three subcontractors located in Israel, none of which have had any significant delay and maintain relationship with multiple suppliers of major component. In 2024, we return more than $285,000,000 to shareholders via repurchasing, representing approximately 19% of our share capital and more than double our fiscal year twenty twenty four free cash flow. As we mentioned in today’s press release, we are happy to report that our Board has approved a new tax efficient shares repurchase program of up to 10% of our share capital to be executed over the next three to six months. Together with our 2024 repurchases, this represents approximately 27% of our shares capital to be bought within less than fifteen months.

Given our strong free cash flow generation and our confidence in our business, we are also exploring in consultation with our financial legal and tax advisor, returning significant amount of capital by the end of the year to create future value to our shareholders. We continue to evaluate our option to enhance shareholders value as part of a broad balanced disciplined approach to capital allocation. We believe this latest decision reflect our strong confidence in the company future and commitment to delivering value for our shareholders. Now, I would like to turn the call over to Yair, our Chief Financial Officer. Yair, please.

Yair Malka, CFO, InMode: Thanks, Moshe, and hello, everyone. Thank you for joining us. Starting with total revenue, Inwood generated $97,900,000 in the fourth quarter of twenty twenty four with a gross margin of 79% on a GAAP basis. For full year 2024, revenue totaled $394,800,000 a decrease of 20% compared to 2023. Non GAAP gross margins remained the highest in the industry and within our target range at 80% for the fourth quarter and 81% for the full year of 2024.

In Q4 and in the full year of 2024, our minimally invasive technology platforms accounted for 8687% respectively of our total revenues. For the full year of 2024, consumables and service accounted for 20% of revenue, an increase from 16% in 2023. Moving to our international operations, fourth quarter sales outside The U. S. Accounted for $35,200,000 or 36% of sales, a 23% decrease compared to Q4 last year.

This decrease was across all regions. For the full year of 2024, sales outside The U. S. Accounted for $150,000,000 or 38% of sales, a 19% decrease compared to 2023. To support our operations and growth, we currently have sales team of more than two sixty direct reps and 87 distributors worldwide.

GAAP operating expenses in the fourth quarter was $49,800,000 and $204,500,000 for the full year, a 105% decrease year over year respectively. Sales and marketing expenses increased slightly to $44,700,000 in the fourth quarter compared to $49,500,000 in the same period last year. For the full year of 2024, sales and marketing expenses totaled $181,400,000 down from $193,000,000 in 2023. The year over year decrease was primarily due to lower sales commissions resulting from a decline in sales and a reduction in share based compensation. These decreases were partially offset by increases in salaries, trade shows expenses and other marketing costs.

Next (LON:NXT), we look at share based compensation, which decreased to $3,400,000 in the fourth quarter of twenty twenty four and $16,600,000 in the full year of 2024. On an under basis, operating expenses were $46,800,000 in the fourth quarter compared to total of $49,500,000 in the same quarter of 2023, representing a 6% decrease. For 2024, non GAAP operating expenses were $189,800,000 compared to $194,100,000 in 2023. GAAP operating margin for Q4 and for 2024 was 28%. Non GAAP operating margin for the fourth quarter and for full year 2024 was 3233% compared to forty five percent for the fourth quarter of twenty twenty three and for full year 2023.

GAAP diluted earnings per share for the fourth quarter were $1.14 compared to $0.64 per diluted share in Q4 of twenty twenty three and $2.25 in 2024 compared to $2.3 in 2023. Non GAAP diluted earnings per share for this quarter were $0.42 compared to $0.71 per diluted share in the fourth quarter of twenty twenty three and $1.76 for 2024 compared to $2.57 for 2023. Once again, we ended the quarter with a strong balance sheet. As of 12/31/2024, the company had cash and cash equivalents, marketable securities and deposits of $596,500,000 This quarter INMUT generated $32,400,000 from operating activities. Because of our strong balance sheet and free cash flow, we completed our fourth share repurchase program approved last September in the fourth quarter, buying back $135,000,000 or 7,700,000.0 ordinary shares, out of which $120,000,000 were purchased during Q4.

This is in addition to the share repurchase program approved back in May for 8,400,000.0 ordinary shares. In total, we repurchased 16,000,000 ordinary shares or $285,000,000 under these programs in 2024, returning capital to our shareholders in a tax efficient manner. As part of our financial update, I’d like to highlight a significant one time tax adjustment. Over the years, our U. S.

Subsidiary has accumulated a federal tax loss carry forward of approximately $2.00 $3,000,000 and a state tax loss carry forward of about $165,500,000 This primarily stem from employee stock option exercises that generated tax deductions exceeding recognized compensation expenses. After reviewing our cumulative income in recent years and evaluating the realizability of deferred tax assets, we released the valuation allowance related to our U. S. Net deferred tax assets. This led to the recognition of a deferred tax assets of $55,100,000 It’s important to note that this amount has been adjusted for non GAAP purposes.

Before I turn the call back to Moshe, I’d like to reiterate our guidance for 2025. Revenue between $395,000,000 and $4.00 $5,000,000 non GAAP gross margin between eighty percent and eighty two percent non GAAP income from operations between $130,000,000 and $135,000,000 non GAAP earnings per diluted share between $1.95 and $1.99 I will now turn over the call back to Moshe.

Moshe Mihrafi, CEO, InMode: Thank you, Ariel. Operator, we’re ready for questions.

Conference Operator: We will now begin the question and answer session. Our first question comes from Danielle Mantowski with UBS. Please go ahead.

Danielle Mantowski, Analyst, UBS: Hey, good morning, everybody. Thanks so much for taking the questions here. Just wanted to, Moshe, get your further thoughts on capital deployment here. Appreciate the new share repurchase, but you guys have been transparent in the past about also being opportunistic on the M and A front. Just curious if that’s still the case and then just one follow-up after that.

Moshe Mihrafi, CEO, InMode: On M and A? Yes, Frank. Well, as you know, we are always exploring M and A opportunity. Once it’s come, we will report that with it. So far, we’re not able to find something that we can buy or very synergetic to us.

And therefore, we have decided to start expanding the buyback. In 2024, we bought $285,000,000 of shares back from the market. And now we announced another 10%, which I believe will accumulate to another $120,000,000 maybe a little bit more million dollars depend on the share price. Again, if opportunity will present itself, which will be either complementary to our product line or synergetic to our product line or something that to do with the aesthetic that we do not make, I mean in the energy based devices, which are similar to what we’re doing, we will explore it and report. But right now, we have nothing in the pipeline.

Danielle Mantowski, Analyst, UBS: Okay, got it. And then my follow-up question is just, I mean, I assume you guys are seeing the sort of leading economic indicators that we see, but is there anything that you are seeing under the surface there? We now have a new administration in place here in The United States. The news flow is pretty volatile there though too. Are you seeing anything that gives you any comfort in a potential economic sort of turnaround here at some point in 2025?

Appreciating, I don’t think that’s what’s reflected in your guidance, but just curious qualitatively what you might be seeing if there’s anything that gives you some optimism or recent optimism here? Thanks so much.

Moshe Mihrafi, CEO, InMode: Well, so far the answer is no. We don’t see the light at the end of the tunnel, unfortunately. And we don’t see it in the beginning of twenty twenty five, Not in our business, maybe in other businesses they can see something. But we try to estimate when the economic market or the macroeconomic will approve something and we said that it might happen in the second quarter of twenty twenty four. I’m sure you remember that, but it was we were wrong.

It didn’t happen. Unfortunately, the second half of twenty twenty four was also not good one for InMode. We don’t want to do any estimation at that point. We would like to work and if something will come, maybe when interest rates will go down and we see some kind of improvement, we will report.

Danielle Mantowski, Analyst, UBS: Thank you.

Conference Operator: Our next question comes from Matt Miksic with Barclays (LON:BARC). Please go

Matt Miksic, Analyst, Barclays: ahead. Great. Thanks so much for taking the questions. So one on the sort of management structure. I know you made some changes in the fall and

Conference Operator: sort of

Matt Miksic, Analyst, Barclays: had talking about, I think, realigning the senior management team and sales marketing and maybe CMO kind of structure against your the markets that you’re going after. So wondering if you could give us an update as to how that’s proceeding, what we should expect to hear or see about it? And then I have one follow-up.

Moshe Mihrafi, CEO, InMode: Well, all the managerial changes that we have done were implemented in 2024. I believe we discussed that a quarter ago. We changed management in three countries in Europe, Spain, UK and France, just because we felt that the existing management was not eager enough, was not reading the market right and we refreshed all of this. In addition to that, we have nominated a guy to be a Vice President that manage actually the all five subsidiaries in Europe. It’s a new position that we added because we believe that distribution and subsidiaries are working differently and we would like to emphasize the direct sales and get it as much as we can because it will allow us to be close to the doctor and also to recognize the full value of our sales.

In The United States, as you know and we report that we change management. Basically, we released the President and two Vice President of Sales and we refreshed again within the organization. We did not bring people from the outside. We have two new Vice President of Sales, one for the East, 1 for the West. And also we made a little bit different allocation as far as territory between the East and the West to maximize the ability of the reps and the directors.

We do not have yet President for The U. S. Or to North America because Canada stayed the same. And we’re still looking for to find somebody. Currently, I’m also the President of North America and I spend few days a month in The U.

S. And working with them on a daily basis. So as far as management, I’m carrying out the position of the President of North America. As far as Asia, recently we changed the VP or responsible for the countries in Asia with another guy from the industry, not within the organization, but from the industry. And we hope to do some changes there.

I’m flying tomorrow to visit seven countries in Asia with him to go over country by country and determine the budget for 2025 and the strategy for 2025. And I hope that this region will deliver more than it used to. Did I answer your question?

Matt Miksic, Analyst, Barclays: Yes, yes. Very helpful kind of overview of everything you’ve done. So thanks for that. And then just maybe for here or for you, Moshe, if you could help us understand looking at 2025 and this uptick in interest and traction and volume, both in procedures and then hopefully in equipment that we’re all kind of looking for and waiting for and asking about. Maybe help us understand the cadence that you expect, not predicting when volumes will pick up, but is it patient flow and then a month or two later it’s system demand or is it a quarter or two later it’s system demand?

Help us understand how your business inflects if we get to the other side of this cycle here.

Moshe Mihrafi, CEO, InMode: Okay, good question. Well, what happened in 2024 is that first, we saw at least 20% to 25% decrease in the demand for minimal invasive procedures. Now we know that because we sell the disposable and we can see how many disposable we sold. And don’t forget as we install additional equipment in the market, we anticipate we believe that the total numbers of disposables should grow, but it did not, it went down, mainly in The United States. Second, the interest rate for leasing, which is the method by which doctors are buying equipment during the inflation time in 2024 went up to a range of 12% to 14% on annual basis, which is very high.

That combined with the fact that doctors see less patient, basically brought up the decrease in total revenue of 20% that we experienced in 2024. Now for the future. For the future, I believe two things need to happen. If the interest rate will go down, the interest rate on leasing will go down. Once that happened and people and patient will start going back to the doctor to get minimally invasive.

One thing I want to say here, a treatment of Morpheus or treatment of Quantum (NASDAQ:QMCO) or treatment of FaceTite are not similar to a treatment of hair removal with laser. I mean, these are $1,000 treatment and not $100 treatment. And people tend to delay that once they don’t feel comfortable with the macroeconomics. So once customers will start going back to the doctor office and we will see that based on the numbers of disposables that we will sell to the doctors and the interest rate will go down, at that point, we will see a turnaround. Currently, we don’t see it yet.

Matt Miksic, Analyst, Barclays: Got it. Thanks so much for the color.

Moshe Mihrafi, CEO, InMode: Thank you.

Conference Operator: The next question comes from Michael Sarcone with Jefferies. Please go ahead.

Michael Sarcone, Analyst, Jefferies: Hey, team. This is Mike on for Matt this morning. Thanks for taking the questions. I guess just first one to start more of a modeling type question, but we didn’t see typical seasonality through the quarters in 2024. I was wondering if you can give us just some color on how you’re thinking about seasonality in 2025?

Yair Malka, CFO, InMode: Yes, yes, that’s you are spot on with why we were kind of surprised in 2024. We expected Q4 we expected to see typical seasonality in 2024, especially in what we used to call the pro form a numbers. And Q4 was not the strongest quarter of the year. I do want to believe that in 2025, the overall numbers would look the same as 2024, but we probably should go back to more traditional seasonality this year, where Q1 is usually the slowest quarter of the year. Q2 is a strong quarter.

Q3, because of the fact that this is summertime, it’s somewhat soft quarter. And then Q4 should return to be the strongest quarter of the year.

Michael Sarcone, Analyst, Jefferies: Got it. Thanks, Yair. And then just last one for me. And Moshe, I think you might have mentioned this kind of reading in between the lines. You said you have multiple suppliers for the strategic components of your systems.

I guess just in light of all the volatility we’re seeing around potential tariffs and when they may be implemented, could you just maybe give us some comments around supply chain risk and how INMOAD is thinking about what could happen if there are potential tariffs put in place either Canada, Mexico or China?

Moshe Mihrafi, CEO, InMode: Well, I mean, right now, we don’t suffer with any change in the tariff and duty and import taxes to Israel. Some of the components are made in Israel, so we don’t have any problem. Some of the assemblies are made in Israel. Some we buy from The U. S, the good stuff, like diode laser, etcetera.

And I hope that we will not see a 25% tariff like Canada and Mexico. I believe that the relationship between Israel and The United States are in a sense good relationship and it will not happen to us. The fact that we have multiple suppliers in a different part of the world give us some protection as well. Because if something will happen in one country, then we can buy it from another country. The component that we’re using except maybe three or four are not exclusive to one supplier.

We have many not many, we have at least two, three suppliers that we work with in order to negotiate prices and lead time and etcetera. But and we maintain all of them and they know that they are in competition with others. So if something will happen in the tariff structure vis a vis Israel, we are ready for that. It will probably will not affect us.

Michael Sarcone, Analyst, Jefferies: All right, great. Thanks for the color Moshe.

Conference Operator: The next question comes from Caitlin Cronin with Canaccord Genuity. Please go ahead.

Danielle Mantowski, Analyst, UBS: Great. Thanks for taking the question. Just one on consumables. So I think global consumable services down about single digits year over year. What about The U.

S. Consumables and services for the quarter?

Moshe Mihrafi, CEO, InMode: Well, the 20% that we lost in 2024 were equal in all the territories. 20% in North America and 20% in ROW. Certain countries in Europe did well, but the overall, if you count all Europe or all Latin America or The U. S. And Canada, it’s about 19% to 20% in each territory.

Danielle Mantowski, Analyst, UBS: Great. And just some more color on the further return that you were talking about for this year and what that would entail and if it would also be tax efficient?

Yair Malka, CFO, InMode: The first ten percent that we announced, this is pretty much the same 10% that we try to do every year. We believe it’s going to be tax efficient. As for future capital allocation program, we will need to wait and see and we will report back. We of course in discussions with expert and advisors both on the tax world and financial world and we would like to try to do it as tax efficient as possible. But we will know only once we finalize it and report back to investors.

Moshe Mihrafi, CEO, InMode: I believe, just to add to what Yair said, in Israel, buyback is considered by the Israeli IRS as paying dividend. And therefore, you need to pay 20% tax. We try to do it in the most efficient way with some pre ruling from the IRS etcetera. So we do the best we can to buy back shares without paying dividend tax.

Conference Operator: The next question comes from Frank Matson (NYSE:MATX) with Needham and Company. Please go ahead.

Caitlin Cronin, Analyst, Canaccord Genuity: Thanks for taking my questions. I guess first, the EPS guidance that you guys are providing, does that account for the share repurchases that you’re guiding to as well?

Yair Malka, CFO, InMode: No. We usually don’t account for future share repurchase program when we put guidance

Caitlin Cronin, Analyst, Canaccord Genuity: out. All right, got it. And then, it sounds like in 2024, you called out there were some supply chain challenges in addition to lower demand. So I mean, I don’t know if it’s possible to separate those two issues, but was there a situation where you could have sold more systems if your supply chain had been functioning better or was it really just purely an issue of demand not being there?

Moshe Mihrafi, CEO, InMode: Okay. Hi, this is Moshe. Well, just due to the war in Israel, on the first quarter, on the second quarter, because our major facilities are in what we call the war zone in the North, we had some delays in manufacturing. But as you remember, we worked two or three shifts a day on the third quarter and we have supply a $30,000,000 of preorders that we receive on the first and the second quarter. Q4, everything was back to normal and we delivered everything within a week or ten days.

So the decrease in the revenue did not come because of logistic or supply chain or the war in Israel or disability to manufacture. We have two production lines, each one of two production facilities, each one can capable to produce all of our platforms and disposable. So we didn’t see any issue even during the months of the war to deliver. Sometime it was back order and we supply them no later than one quarter. So most of the decrease in the revenue came because of a slowdown in The U.

S. And in Europe and high interest rate and basically macroeconomics and the fact that people not enough people went to the doctor to get treatment.

Caitlin Cronin, Analyst, Canaccord Genuity: Okay. So it sounds like it may be affected the quarterly sequencing, but kind of on an annual basis, you sort of caught up to where you would have otherwise been, I guess. Is that a fair way to summarize it?

Moshe Mihrafi, CEO, InMode: That’s correct.

Caitlin Cronin, Analyst, Canaccord Genuity: Okay. All right. And then finally, just on the existing installed base, do you have any sense for how old those machines are on average? And what I’m getting at is, could we start to see some sort of replacement cycle here at some point, particularly now that you’re launching some new platforms or I guess upgraded or enhanced platforms with Ignite and operators now? Well,

Moshe Mihrafi, CEO, InMode: we have something like 27,000 system installed worldwide, out of which 12,000 in The United States. And I would say the oldest, the edge system on the market is from probably in The U. S. From 2017. So they are not very old.

Don’t forget, this is an RF system and if you maintain it right and you buy service contract from us, you can keep it, I don’t know, more than fifteen years. We do see doctors are buying second machine because of the new generation that we brought to the market. For example, OPTIMAS Max versus OPTIMAS, IGNITE versus BODYTITE and doctor wants to go to the newest version and keep the old one, so they can walk parallel in two rooms or on two patients. But I don’t think there is any, I would add, there is any install base or any system that on the market that are not being used. We see from all of the systems, we believe they’re still working.

Yair Malka, CFO, InMode: And I’ll add to that for 2025, we do plan to introduce some promotions for upgrades, upgrading some of the old systems, the one that out there in the field for more than five years. So the doctors did pay it off. And we are going to come up with some attractive promotions for them to upgrade to especially the new Optimus Max and the new Ignite.

Caitlin Cronin, Analyst, Canaccord Genuity: Okay, got it. Thank you.

Conference Operator: The next question comes from Jeff Johnson with Baird. Please go ahead.

Frank Matson, Analyst, Needham and Company: Thank you. Good morning, guys. I guess just gross margin questions, last couple, maybe it’s a multi part gross margin question. But in the fourth quarter, gross margin slipped below that 80 level.

Danielle Mantowski, Analyst, UBS: Is that just some manufacturing inefficiencies from the lower volumes? Obviously, you’ve been

Frank Matson, Analyst, Needham and Company: higher cost on the supply chain or sorry, higher discounting you might be doing in the quarter? Just what puts that gross margin in the fourth quarter maybe below that 80% level?

Moshe Mihrafi, CEO, InMode: Well, our gross margin in 2024 was above 80%. Now, we need to remember that we’re manufacturing hardware and not software. Prices of components, sub assemblies and logistic and supply chain went up significantly in 2024. But we manage to be more efficient, although we lost two percent or 3% on the gross margin, we’re still above 80%. The gross margin in 2024 was not because of the war or inefficient in the logistic.

We’re still very efficient in the logistic and in the manufacturing. We lost 2%, first because revenue went down by 20% and we did not cut personnel and we did not cut people and there was always fixed cost in any product, which we maintain because that’s the IP of the product of the company. And therefore, I believe that’s one of the reason why we lost, I don’t know, maybe 1% or 2%. The second reason is we did not raise prices and prices of component and some assembly went up in 2024. We believe that in 2025, once we see a new momentum, we will be able to recover 2%, three % on the gross margin.

Frank Matson, Analyst, Needham and Company: Okay. And then I guess two follow ups on that Moshe. One, so as we’re hopefully moving beyond the Israeli elements floor, you don’t believe that’s going to help just from a workflow efficiency standpoint, anything like that? That alone not enough to pick up, number one, any gross margin. And number two, as you introduced the CO2 laser, my understanding with the history of the company is that one of the things that helped those gross margins in the 80s and solid gross margins for capital equipment is that the RF technology is relatively low cost to manufacture, especially relative to the ASP in the field in the system.

So is CO2 laser manufacturing, is it a lower gross margin product? Are the input costs and guts of the system more expensive than ours? Thank you.

Moshe Mihrafi, CEO, InMode: Well, good question. You asked two questions. One, I mean, we all hope that the war and the ceasefire will continue, especially on the North. So we will not go back to a war situation. As you know, we’re in the North and that was a war zone up to three months ago or even something like that.

Your second question regarding the gross margin on RF versus laser, the RF, the gross margin is higher because to manufacture laser cost more. And therefore the gross margin that we report is the average between all the RF, IPL, laser and all the other platforms that all the other indication that we cover in each platform.

Frank Matson, Analyst, Needham and Company: Understood. Thank you.

Conference Operator: The next question The next question comes from Sam Iber with BTIP.

Jeff Johnson, Analyst, Baird: Maybe just following up on the last question. Anything on timing you can say for the CO2 laser? It sounded like you already do have FDA approval. And then if I’m reading your commentary right, that’s going to be a multi application platform with Morpheus. I would just love to hear how you’re positioning that in the marketplace?

Moshe Mihrafi, CEO, InMode: No, the CO2 laser is only CO2, cannot carry any RF. It’s a laser device. Timing, hopefully, we will start seeing attraction in The U. S. Market because currently we have only FDA.

We don’t have other regulation on this platform. I mean for other countries and therefore sometime toward the end of the first quarter and the beginning of the second quarter.

Frank Matson, Analyst, Needham and Company: Okay, that’s helpful. And I think it’s

Jeff Johnson, Analyst, Baird: been a couple of quarters since we heard any updates on some of the adjacent products like EMPOWUR and ENVISION. Just wondering the latest on how some of those are doing over the last couple of quarters?

Moshe Mihrafi, CEO, InMode: Well, like the full portfolio, 2024 Envision and Empower went down also around 20%. And therefore, I mean, once the market will pick up, we will see some increase on this medical or so called medical product as well.

Jeff Johnson, Analyst, Baird: Thank you.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Moshe Mizrahi, INNODE’s CEO for closing remarks.

Moshe Mihrafi, CEO, InMode: Thank you, operator. Thank you, Mimi. I would like to thanks everybody who was on the line for I would like to thanks all InMode employees worldwide, the Israeli team and U. S. Team and other team around the world, either subsidiaries team or agent.

I’m sure that many of them on the line. We do hope that 2025 will be a better year than 2024. We don’t see it yet, but hopefully it will come in the next following months. Thank you, everybody.

Conference Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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