InMode at Barclays Healthcare Conference: Navigating Market Challenges

On Wednesday, 12 March 2025, InMode Ltd (NASDAQ: INMD) presented at the Barclays 27th Annual Global Healthcare Conference. The company outlined its strategic plans amid stagnant consumer demand in the aesthetics market. While the market remains flat, InMode is focusing on product innovation and strategic growth to prepare for potential recovery.

Key Takeaways

• InMode anticipates a flat market similar to 2024, with no significant improvement in consumer demand.
• The company is investing in R&D and launching new products like OPTIMAS Max and IgniteRF.
• A new 10% share repurchase program has been announced for 2025, with a focus on potential M&A opportunities.
• InMode remains financially stable, contrasting with competitors facing financial difficulties.

Financial Strategy and Capital Allocation

• Share Repurchase Program: InMode continues its strategy of repurchasing about 10% of shares annually, with a new program announced for 2025. The company is evaluating further buybacks versus dividend payments.
• M&A Opportunities: The company is exploring mergers and acquisitions in aesthetics and related fields, ensuring any deals are accretive to earnings per share (EPS) and maintain gross margins.
• Financial Stability: Despite market challenges, InMode has maintained its R&D and operational spending, learning from past experiences like COVID-19 to avoid downsizing.

Operational Updates

• Product Launches: InMode introduced next-generation products such as OPTIMAS Max and IgniteRF, featuring improvements in treatment efficiency and energy delivery. The launch of a CO2 laser platform aims to capitalize on the trend of bundled procedures.
• Sales and Marketing: The company has slightly increased its sales force both in the U.S. and internationally, with no cuts in marketing initiatives.
• International Expansion: Following the establishment of a new subsidiary last year, InMode may establish another one this year to strengthen its global presence.

Market Conditions and Consumer Demand

• Consumer Demand: Disposable sales in the U.S. remain flat compared to Q4, with ongoing headwinds and uncertainty expected to persist.
• Physician Investment: Consumer confidence significantly influences physicians’ decisions to invest in capital equipment, with high interest rates also playing a role.
• Leading Indicators: Increased demand for lower-cost procedures and aesthetic injectables could signal a broader market recovery, with improved consumer confidence as a key indicator.

Future Outlook

• Guidance: InMode expects market conditions similar to 2024, with new product contributions ramping up over time.
• Product Development: The company is continuing R&D projects and plans to launch additional applicators for the OPTIMAS Max, along with a new device for ENT next year.
• Market Trends: Monitoring the trend of bundled procedures will inform future product development and offerings.

For further details, please refer to the full transcript of the conference call.

Full transcript - Barclays 27th Annual Global Healthcare Conference:

Matt Mexic, Medical Devices Analyst, Barclays: Good morning and thanks for joining us this morning. Very pleased to have with us again this year, InMode and the Chief Financial Officer, Yair Malka. My name is Matt Mexic. I cover medical devices here at Barclays.

So, one of the things that I wanted to start with, if it’s a good sort of baseline place to start is, I think the cycle or the consumer trends and demand that have kind of softened, slowed, maybe bottomed in the last year or so, and try to get your sense here at this point, what are you seeing and how are you thinking about the next three, six, nine months in terms of legless call it the consumer cycle and aesthetics?

Yair Malka, Chief Financial Officer, InMode: Great question. Matt, thanks for having me. The best way for IMO to track the consumer demand is by our disposable sales. And looking at our disposable sales in The U. S, which is our main market, we don’t see things getting worse in the first two months of the year compared, let’s say, to Q4 to November, December, so January, February, tracking pretty much the same.

Things are not improving, but they don’t get any better. And that’s the overall trend I think that we’ve seen so far. Things are not improving, but we don’t see them getting worse. And that’s why again, I’m sure we’ll touch about it later on when we put the guidance for the year together. We assume it’s going to be flat.

Things are going to be similar, very similar to 2024. The headwinds are still there. There is a lot of uncertainty as you can see in the market. We don’t know what’s going to happen or how the even Q1 would look like for us, let alone the entire year. It’s very difficult to focus in our space.

And especially in our industry where you have majority of the revenue is going to close from now until the end of the quarter. In the last two, three weeks of each quarter, we generate the majority of the business. So, in terms of the consumer demand, we don’t see that improving. But as I said, it’s pretty flat. We don’t see that getting worse.

In terms of doctors, our providers placing orders for capital equipment, basically buying devices, that’s a trickier question. And we need to look and see, because consumer confidence has a lot to do also with the doctors themselves when they make the decision whether to invest in their practice or not. If they see that the economy is unstable, they might decide to wait a little bit before making the investment. So we need to see how the quarter is going to look like. But so far things look pretty much the same.

Same headwinds that we experienced in 2024 continuing to 2025.

Matt Mexic, Medical Devices Analyst, Barclays: Right. Yes. So if we kind of think back to how the beginnings of the slowdown in systems, I think was first felt like seemed to be related to delays in financing. Correct. And then it kind of settled into something as you sort of took some steps to resolve that, eliminate those delays.

It really became this kind of call it sluggish, slow consumer that was then kind of influencing centers.

Yair Malka, Chief Financial Officer, InMode: If you think about that There’s still some of the financing headwinds that we see mainly on the interest side. Yeah. The interest rate side, the interest is fairly high still and that makes the monthly payment of our doctors more expensive. Yeah. So, there’s still that, but compared to the consumer confidence or slow consumer demand, I think that has a much bigger impact than the financing impact.

Matt Mexic, Medical Devices Analyst, Barclays: Right. And I think you’ve said that, yes, the financing, if we could snap your fingers and solve the financing problem now or eliminate that as a concern, you’d still with this clinicians maybe wanting to see a little bit more of a Absolutely. If doctors

Yair Malka, Chief Financial Officer, InMode: see that they are not as busy as they used to be in prior years, that’s a problem even though even if we didn’t have the financing issues.

Matt Mexic, Medical Devices Analyst, Barclays: Yes. So maybe many of the med device markets that we cover are a little less tied to consumer cycles. There’s discretionary elements to them, but not as much as aesthetics. And so, in the past, when you’ve seen having sort of followed these cycles in your business for a while, what have been the things that have kind of been leading indicators of consumer demand picking up, like what else can we look to? Or what have been indicators of confidence among clinicians that have continued to kind of hold things back in the past?

Yair Malka, Chief Financial Officer, InMode: That’s a good question, because looking back, each free session has its own characteristics. So it’s very hard to tell. But personally, I would expect to see demand start going for the providers, for our doctors, probably with the less expensive procedures that will come back first in terms of how we position our procedures. So, they are somewhere in the middle. At the top, you have the most expensive procedures of the full plastic surgery for a facelift.

Then you have our minimally invasive procedure. These are in the thousands of dollars. And then you have the procedures that are in the hundreds of dollars. Yes. And I think this would come back first, injectables and some fairly low energy based devices.

So we probably will start seeing them improving first, because everybody had a terrible year in 2024. So I will even the injectables, filler stocks and etcetera, as a whole, as a group. So probably they will come back first and then we will follow and then this would give some confidence to the doctor to start reinvesting in their practice and buy more capital equipment. In my mind that’s how I foresee that happening. When that’s going to start, that’s a completely different question.

It’s a very good question. It’s hard to tell. But one thing I know, Inwood is a very strong and stable company. Unlike some other companies in the space, one of them even filed Chapter 11 last week, Inwood is a very strong and stable company. We will be able to get through that and be ready to take over the market as soon as things start improving.

And some companies that will not survive these headwinds might create more opportunities for us.

Matt Mexic, Medical Devices Analyst, Barclays: Sure, right, from an acquisition standpoint.

Yair Malka, Chief Financial Officer, InMode: Either acquisition or just plain check-in

Matt Mexic, Medical Devices Analyst, Barclays: market share? Yes. So, just a leading indicator might be if some of the aesthetic injectable filler kind of volume start picking up that might be a sign that your category of procedures might be next?

Yair Malka, Chief Financial Officer, InMode: That’s a good sign. I know some analysts are following discretionary spending on luxury items, because for many consumer that’s considered to be a luxury procedure. Okay. So overall, I think we need the consumer confidence to improve to see consumers start spending again, especially at high price ticket items. And I think that should give us a good momentum.

Matt Mexic, Medical Devices Analyst, Barclays: And that’s the consumer side. Now on the doctor side, the clinician side in the centers, I guess things have obviously changed fast in the last fifty days in The U. S. A lot of uncertainty. We hear often that you’re like just regular business coverage of everyone’s kind of aware of the fact that hard for companies to plan, hard for companies to commit capital, not knowing sort of how things are going to shake out on a geopolitical scale.

But on a sort of microeconomic scale at the clinician level, do you we ask this question about hospitals all the time. There’s uncertainty, if there’s risk to budgets, what’s going to happen. At the clinician level, do you think that that same kind of calculus is starting to work its way into clinic doctor and center behavior and like do we want to close this deal now or do we want to wait another month or two to see what happens? Is that something that you’re hearing bubbling back through your channels?

Yair Malka, Chief Financial Officer, InMode: Uncertainty is not good for business, any business, right? So, we don’t hear that yet, but as I said, most of the business is going to close in the next few weeks. So, what happened in the market might have an impact. Yes. And again, doctors that see that there are some stability in the market, they’ll talk about recession.

Again, they might take the time to think here making a $140,000 investment into their practice is a lot of money. And if they don’t have this confidence and they hear all this news about recession and uncertainty, they might sit on the sideline for another quarter or two. We don’t know. We don’t hear that yet, but that’s definitely a possibility. We will know more after the quarter end, but uncertainty

Matt Mexic, Medical Devices Analyst, Barclays: is not good for any business. Yes. No, that’s fair. So on the cash flow and sort of ability to sort of endure, it is kind of slowdown as you have that has positioned to do a couple of things. One is repurchase shares, which you continue to do in the absence of finding an M and A opportunity that you think is a good fit or would make sense.

And it’s also enabled you to kind of to do that in the context of preserving your operations and remaining kind of whole and ready for the cycle to turn. Is that still the strategy as you head into this year?

Yair Malka, Chief Financial Officer, InMode: Yes, absolutely. I think despite all the headwinds, we plan to continue basically business as usual. We continue to launch the products that we plan to launch. We continue with all the R and D project that we have in the pipeline. We didn’t cut on marketing initiatives.

We didn’t cut on sales force. In fact, we actually increased the sales force a little bit both in The U. S. And outside of The U. S.

We established a new subsidiary last year and we are looking maybe to do the same this year. In the past several years, we opened one to two new subsidiaries every year as part of our growth model. And we plan to continue to do all of this. And we understand that that might result in a hit in the margins as we as happened in 2024. But I think we look at it as an investment and we believe that it will be paid off eventually.

And we did the same thing during COVID. And it paid off big time as soon as the market started recovering. Right. Unlike many other companies in the space where they downsize, terminate some of their sales force and then struggle to rehire and rebuild their companies once the market reopened, we were there ready to for the market and we plan to do the same right now.

Matt Mexic, Medical Devices Analyst, Barclays: Okay. So we talked about some of the risks and the headwinds. So last year despite those same kind of risks and headwinds consumer demand centers waiting, financing being at a higher cost and still some delays. You did get a fair amount of traction with some of the new products that you launched, a little bit complicated as you sort of grew your supply to meet that demand. But maybe if you could talk about where you’re seeing what some of those products are, where you’re seeing the demand for them and kind of what’s driving that some of that sufficiency, some of that sort of new technology, maybe walk through some of the things on the positive side that are sort of offsetting some of the concerns that we talked about?

Yair Malka, Chief Financial Officer, InMode: Great question. So in 2024, the beginning of twenty twenty four, we launched two new products, which were basically the next generation of two of our legacy products, the products that we used to sell the most in prior years. The OPTIMAS Max, which is the next generation of the OPTIMAS and the Ignite RF, which is the next generation of the Body Tight Face Tight technology. And both of them are very exciting, especially the IgniteRF. It has the new QuantumRF handpiece on it, which is a breakthrough technology as far as we’re concerned because we were able to put two electrodes and keep the bipolar feature of our procedures, we put it in one poke, one cannula instead of two in the past, one internally and one externally.

So we still have those. Those we actually made stronger in terms of energy delivery, almost 50% stronger. This might save time for the doctors when they come to treat their patients. And time is the most expensive resource for the doctor. So if you are able to come up with procedures that will make his work more efficient and save him time, that’s a big win for them.

And there’s a lot of appeal there. So we have that and we also have the Quantum RF, which is also a rigid cannula unlike the flexible cannula with the body tight and face tight. So now the doctor has more option to choose from, right? And it took us some time to get the FDA approval and start delivering the quantum RF. So it’s only towards the end of twenty twenty four.

But the initial response, it’s very promising. Okay. And on the Optimus Max, we also have the new Morpheus8 handpieces, which are able to distribute the energy better and more efficiently in between the needles. And that results again faster treatment, but more uniform heat distribution. We also have an IPL handpiece on the platform that is much more powerful than the old one.

And we plan to bring additional applicators to this device in the future. And we’ll talk about it once we introduce those. This year, we are looking to add two more platforms. We disclosed only the first one, which is CO2 laser. And the reason we are doing that is we’ve seen this trend in the market that many users are combining Morpheus8 with something else.

Okay. There is this trend out there that doctors start bundling procedures. Right. Whether injectables with Morpheus8 or some topical with Morpheus8 or we start seeing a lot of CO2 laser with Morpheus8. They send it to the bundled package to the patient.

So you get fractional effect in addition to the Morpheus8. And we wanted to take advantage of this trend and decided to launch our own CO2. Again, CO2 laser is not a new technology in the market. There are several companies that has offered that over the years. However, we wanted to become a one stop shop for our customers.

And we know that they offer those bundled packages to the patients. So we want them to buy everything from us. Okay. And that’s something that we will continue to monitor these kind of trends in the future and see when it makes sense to combine them without technology. The timing on the combination laser?

So this one we launched the device. We start selling that already. Public contribution for this quarter will be minimal. And overall, when we launch a new product, our expect we like to set the expectation low. And again, especially when it’s not a new technology, so both new products that we plan to launch this year will have minimal contribution.

I would say that’s fair to assume at least at this point in time.

Matt Mexic, Medical Devices Analyst, Barclays: Sure. Yes. They’ll ramp. You’ll see the market responses. And the Morpheus8 is the system that kind of takes that multilayer process that folks were doing, like, so to call it manually, and it sort of collapse

Yair Malka, Chief Financial Officer, InMode: most of you said it is a functional micro needling device. Yes. And the next generation that we launched last year basically allow a better heat distribution with the needle and you are able to deploy that in different depth. Yes. And you can control the temperature and the energy that will be different in different depth.

So, the deeper you go, you want higher energy, the more superficial you go, you want lower energy, because you don’t want to create a burn. You don’t want to burn the dermis and epidermis. And we are able to achieve that with the new Mophus safety. In an automated way. Yes.

In one pant. Yes. As opposed to like having to do three passes. Yes. So this is again talking about seven times to doctors instead of doing like three, four passes all over the face, now they do one to two.

Matt Mexic, Medical Devices Analyst, Barclays: So, yes, the reason I ask is just maybe to put some context around that like with, I don’t know, know, skin tight, body tight, Morpheus procedures, is this take twenty or thirty minutes off of procedures, like ten minutes off of procedure, like just to put it in the context of a clinician trying to figure out, I could do X more procedures.

Yair Malka, Chief Financial Officer, InMode: Probably towards twenty, twenty five minutes. Okay. Instead of forty five minutes, it can be twenty five to thirty minutes. That’s helpful. Okay.

Matt Mexic, Medical Devices Analyst, Barclays: And then kind of coming up on time, but let’s see, you’ve laid out margin guidance. I mean, the repurchases obviously opportunistic,

Yair Malka, Chief Financial Officer, InMode: but Yes. We’re opportunistic, but we have been consistent with doing about 10% a year, every year. But we are looking at all options. We are in the middle of doing we just started another middle. We recently announced the 10% share purchase program for 2025.

Once we complete that, we are going to examine all the options. Maybe we’ll do because from that point on, any additional buyback would be treated as dividend in terms of tax purposes. So, we can do whatever we want, but this won’t be treated as dividend. So, we are going to evaluate whether we should do additional buyback. Maybe we should do dividend now when they are taxed the same.

And again, M and A is always there. We are going to be opportunistic about that too. If we see something of an interest for us either in aesthetic or in one of those new areas, segments that we are going after, women has ophthalmologies, ENTs we are going to bring a device for ENT next year, urology, these are areas of interest for us. And if we see it interesting, we might act upon it. Sure.

Yes.

Matt Mexic, Medical Devices Analyst, Barclays: And that just to put context is something you from our conversations you’ve looked at actively for a couple of years now, the challenge being impact on the gross margin and strategically? Is this something we’re It’s

Yair Malka, Chief Financial Officer, InMode: more strategically impact on the gross margin. We have a very high gross margin. So for sure probably whatever we do will have an impact on the gross margin. So that’s why we are focusing on getting it accretive to the EPS. Okay.

And that’s good, but.

Matt Mexic, Medical Devices Analyst, Barclays: Okay. But again, something that not that you would ever do a deal, just to do a deal, but I think it came under some pressure to look at opportunities or something and you have. It’s just that, I mean, sometimes not doing the deal is the right call.

Yair Malka, Chief Financial Officer, InMode: Absolutely. And I think and I hope that investor appreciated that despite all the pressure and the fact that we did look at companies and we didn’t even make offer to some companies. The fact that we didn’t do something yet, that means that we are very disciplined with what we

Matt Mexic, Medical Devices Analyst, Barclays: are looking for. Right. Fair enough. So with that, we’re at time. Thank you, Yair.

Always a pleasure and appreciate you coming again this year.

Yair Malka, Chief Financial Officer, InMode: Thank you very much.

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