InMode at Oppenheimer Conference: Navigating Economic Challenges

On Tuesday, 18 March 2025, InMode Ltd (NASDAQ: INMD) presented at the Oppenheimer 35th Annual Health Care MedTech and Services Conference. The company addressed its strategies to overcome the current economic headwinds, including high inflation and interest rates. Despite these challenges, InMode highlighted its robust financial health and strategic initiatives aimed at long-term growth.

Key Takeaways

• InMode maintains a strong financial position with $600 million in cash reserves.
• The company is focused on expanding its presence in women’s health, a market seen as larger than aesthetics.
• Despite a slowdown in sales rep productivity, InMode remains committed to retaining talent.
• InMode has invested $500 million in stock buybacks, equivalent to 30% of outstanding shares.
• The company is exploring M&A opportunities but prioritizes stock buybacks for capital allocation.

Financial Results

• Impact of Macroeconomics:

- High inflation and interest rates since mid-2023 have reduced doctors’ equipment purchases.

- Initial 2025 guidance mirrors 2024 due to stagnant macroeconomic conditions.

• Cash Reserves:

- InMode has $600 million in cash to manage the economic slowdown.

• Stock Buybacks:

- The company has invested $500 million in buybacks, targeting 30% of outstanding shares.

• Gross Margins:

- Aiming to maintain gross margins above 80% and improve by 200 to 300 basis points by the end of 2025.

• Sales Rep Productivity:

- Revenue per rep decreased to $1.2-$1.3 million from $1.8 million due to the economic slowdown.

Operational Updates

• New Product Launches:

- Introduced Optimus Max and Ignite in 2024 amid the economic downturn.

• Competitive Landscape:

- Competitors like Cutera and Venus face financial difficulties, while Cynosure was sold at a low price.

• Women’s Health:

- The Empower platform generated $40 million in sales.

- Plans to establish a dedicated women’s health division and seek FDA approval for overactive bladder treatment.

• Ophthalmology:

- Envision system positioned for aesthetic use and dry eye treatment.

• R&D Pipeline:

- Developing new lasers and a device for ENT applications, along with a device for erectile dysfunction.

Future Outlook

• Macroeconomic Recovery:

- Anticipates increased business momentum as interest rates decline and consumer confidence rises.

• Women’s Health Market:

- Sees significant growth potential in women’s health, larger than the aesthetics market.

• FDA Approval for Overactive Bladder:

- Plans to start a clinical study in Q3 2025 and aim for 510(k) approval by the end of 2026.

• R&D Investments:

- Continued investment in R&D across medical and aesthetic projects.

• Sales Rep Productivity:

- Expects revenue per rep to increase with U.S. market recovery.

Q&A Highlights

• Macroeconomic Impact:

- High interest rates and inflation are affecting doctors’ equipment leasing capabilities.

• Competitive Advantages:

- InMode operates with a lean structure, managing business better than competitors.

• Women’s Health Strategy:

- Focus on overactive bladder treatment, aiming to be first with FDA clearance for a non-surgical solution.

• Sales Rep Productivity:

- Despite decreased revenue per rep, InMode is retaining talent for future growth.

• M&A Criteria:

- Any acquisition must enhance EPS by at least $0.01 within twelve months.

InMode remains cautiously optimistic about its long-term prospects, as detailed in the full transcript below.

Full transcript - Oppenheimer 35th Annual Health Care MedTech and Services Conference:

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: Raj Kalia, Senior Medical Device Analyst at Oppenheimer. Pleased to have an old acquaintance of mine, Moshe Mizrahi, with us to discuss all things INMODE. Moshe, you and I have known each other for, god, almost fifteen years now. And it’s amazing to see, you know, you guys, the energy you’ll put into INMODE. So, Moshe, actually, before I start, folks, you know, you guys know the drill.

I’ll just repeat the obligatory statement. Any questions, just email me or email my juniors and or put it into the chat box. We’d be more than happy to, to pose them to Moshe and Yair. Yair, also welcome this morning. We do appreciate your time.

Yair Malca, InMode: Thanks for having us.

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: So Moshe, obviously the number one question, right? Everyone is asking is about the macro level environment, right? And I don’t think so by any stretch, anyone can say it’s been easy. So start out by just telling us how is in mode, weathering this, what I say and this is my word, self inflicted storm really, you know, on a macro level.

Moshe Mizrahi, InMode: Well, I’m sure everybody everybody saw, in most results in 2024. Well, the macroeconomics, severe situation, I would call it high inflation and high interest rates started in the middle of twenty twenty three. Basically, we noticed sometime around August, September when inflation in The United States went up, and the interest rate also went up, that business are coming down. And the main reason for that is because most doctors today purchase equipment, medical platforms via leasing packages. And when the when interest rate went up to 8%, interest rate on leasing packages went up to 1214%.

When the return on investment to the doctors on in mode equipment is still high, even if they pay 12 to 14% interest rate on a five year lease package, but psychologically, it’s, it’s a barrier. In addition to that, in a in a macro situation like that, people are kind of prefer to wait before they get a treatment, a minimum invasive, or even noninvasive, which can cost them, you know, between $2,000 to $4,000 So they waited to see what would happen. And throughout 2024, we projected in ’20 in the beginning of 2024, we projected that the interest rate will start coming down in the second half of the year, but it didn’t happen. And to tell you the truth, I mean, right now, when you see what happened to the stock market in the last few days and, and they start talking about reignite inflation, it is not helping us at all. So I usually say we don’t see the light at the end of the tunnel.

We’re not predicting when this will will be changed. And we’ll see something more normal as far as cost of capital and business atmosphere and consumer confidence will start going up. And therefore, our guidance for 2025, in the beginning of the year was similar to 2024 since we don’t see a major change yet. Hopefully, it will come sometime in 2025, but we cannot predict one.

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: So, Moshe, your sentiment just in terms of the macro level environment, I presume a lot of it has to do with The US, is being echoed by a lot of other CEOs. Just the general uncertainty and the day to day gyrations, business planning has become very difficult. Moushe, if I could, tomorrow morning, I could take away all the macro level gyrations, how would you characterize pent up demand? Would you come back to normalize growth rates or, you know, it would still take a period of time to recover based on what you are seeing?

Moshe Mizrahi, InMode: Well, of course, it’s not something that happened overnight. We’re not a consumer product. Once once we see the trend down of the interest rate and the trend up of the consumer confidence, I believe we will start to see a new momentum growing. But it’s not going to happen in one quarter. Absolutely not.

It will take time to build the market. It will take time to go and knock on the doors and talk with doctors and also then the technology. I believe that like like what happened after the COVID, we will take a big market share once that happen because, during the slowdown, we did not file paper, we did not stop spending money on marketing, we did not stop not spending investing in R and D and new project. Just in 2024, during the slowdown time, we introduced two major product to the market, the Optimus Max and the Ignite. And we believe once we will start to see some momentum, which will start in The US and will continue in Europe and then Latin America and Asia, it’s always further on on The US, we believe that we will go to a normal numbers.

Yes.

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: And just a final question sticking on the macro level theme Moshe. You obviously saw Cutera has filed for bankruptcy. Yes. And so the market environment, you know, you can end. Do you think IN mode is relatively positioned to capitalize on share from some of these other players that are suffering more?

I mean, you guys seem to be buffered relatively better And I’m curious if share gains just from some of these other players would accelerate the moment the market starts to stabilize somewhat.

Moshe Mizrahi, InMode: Well, it’s not just Cutera that filed for bankruptcy. It’s also Venus filed, not yet, but they are on the verge of bankruptcy. We know that Cynosure was sold to Leutronix almost for no money because they had terrible, terrible result. We know that Candela went down since we didn’t see any product that they introduced to the market in the last two years, the same with Cynosure and others. So the answer is yes.

We believe that the aesthetic market will grow in the future. It’s not coming down. People will not, you know, give up on their appearance and on their quality of flights, not only on aesthetic because we’re, as you know, engaging women enhancing ophthalmology and other stuff that basically improves the quality of life. So the answer is yes. The reason why Cutera went bankrupt is not because Cutera was not a good company.

Cutera, you know, they had they had they had to borrow $400,000,000 And we knew from the beginning when they took the money, when the cost of capital was very low, we knew that they are making mistakes because they felt like rich, but they were not rich. In mode is a different DNA. We have currently $600,000,000 We buy back stock, but we always keep high level of cash in order to overcome slowdown like ’24, ’20 ’3, and and ’25. We are more, I would say, lean and mean company. Look look at our G and A, 3%.

Looking at looked at G and A, 15%. So so we’re we’re managing the business better than other company. Yes, we don’t have, you know, a a backwind right now because the industry is collapsing. But once the the macroeconomics would will will improve, I believe we’ll be the only company or the first company to create a new momentum of the of of of the portfolio and the product that we have with.

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: That that’s that’s an excellent point you made. Houshey, you mentioned women’s health. Right? If and, you know, you guys are obviously targeting overactive bladder. And I’m just curious, how do you all see the competitive dynamics in women’s health?

And walk us through where you all are in the FDA process?

Moshe Mizrahi, InMode: Okay. Well, as you know, we introduced to the market the platforms which call Empower.

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: Mhmm.

Moshe Mizrahi, InMode: And in the sales here, we sold something like $40,000,000 of this particular platform. So there is a demand. There is a demand for all types of indication for women health. You know, vaginal contraction, laxity, dryness, GSM, urinary incontinence. Of course, overactive bladder is more difficult to prove, but all the other indications, we have some approval from the FDA and the other were working model.

Now, the overactive bladder let me just close the door. Just a second. The overactive bladder, it’s a it’s a very major indication. Not many companies has received clearance from the SBA for overactive bladder. And the main solution is, is the full surgical procedures which women try to avoid.

Only one company has received clearance for implantable device, that also cost something like $18,000 to the surgical and the device. Nobody received an overactive bladder indication from the FDA using one treatment, which is ten minutes treatment in the doctor clinic with energy based device. We hope to be the first one. Now, where do we stand? When you try to get this kind of indication, you have to apply for what is called a pre submission path.

When you come to the FDA and say, hey, this is our technology. We did some proof of concept trial, not in The United States because you cannot do that in The United States if you are not under ID. And, you tell them, okay, this is what we want to do. This is the protocol that was suggesting. This is the numbers of patient in the study.

This is the endpoint. This is the biocompatibility of the device. This is the device description. It’s a it’s a it’s a heavy submission. 300 pages.

We already submitted that, and we’re waiting now for the FDA to come back to us with the final question. Once they clear the protocol, we will start to do site selection and hire a CRO because it’s not a simple study. It’s a study with at least six months follow-up and up to one year. We believe that in 2025, we will get the approval, and we will start probably sometime in the beginning of the third quarter. And the third quarter, we’ll start the study in The United States, maybe one site in Israel and one site in Europe in addition to site in The US to to do the study and then file for, what is called, five ten ks Nuvo because you don’t have a predicated device.

And hopefully, sometime after the second part of the second quarter of ’20 ’20 ’6, we will file it. Hopefully, by the end of twenty twenty six, we’ll get the indication. But it’s interesting because we’ve already published some peer review publication on this indication because doctors are doing it off label, not not with our support. They do it doctor can do whatever they want. So the market knows that the system is working and the technology is doing well on overactive bladder.

Once we get the indication, I would say that this is a breakthrough.

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: Yeah. And Moshe, how big a market do you think this could be, this whole category in women’s healthcare? Fast forward three years, four years, how big a market do you see?

Moshe Mizrahi, InMode: Much bigger, much bigger than aesthetic. Much bigger than aesthetic. While if you count all the aesthetic companies together, including InMall, maybe, what, $1,500,000,000 If you look at women health company, it’s a huge market, especially on the wellness side of women health. And we can go from there to any type of indication, fertility, you know, HPV and other, and to improve. Because we believe that women health, it’s a it’s a company by itself.

Mhmm. Sometime next next year, we will we will create the division of women health with special salespeople and marketing people, yeah, so to prepare us to go to this, this market in a big way. But, yes, the market is the market the the women health market, especially the wellness type of

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: the women health, it’s a huge opportunity. The other thing you mentioned, Moshe, was ophthalmology. You know, help us understand how you see this as an opportunity, you know, in any cross selling with other aesthetic procedures. How are you all gaming out ophthalmology?

Moshe Mizrahi, InMode: Ophthalmology is different. The system that we developed called Envision can do all the aesthetic stuff, more fuse, facial rejuvenation, Lumecca, IPL, lower and upper leads, small operation. And the main indication that we’re working on to get an FDA is dry eye. Although we have some proof and publication on dry eye, this is why we introduced the product to the market, but it’s not as big as women have. We consider Envision and ophthalmology as an aesthetic device.

It’s, you know, I mean, dry eye is something that improves your aesthetic as well because you look better and, and you feel better. It’s not very, I would say, medical type like the women have.

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: Got it. Moshi, on Ignite and Optimus, you know, two of the product lines that you mentioned, help us understand, you know, just the the intensity of adoption in the field. You know, how should we think about replacement, same store, new store? Just kind of walk us through where you’re seeing these products go and the resource intensity or capital intensity, you know, for growth in these categories?

Moshe Mizrahi, InMode: Let’s start with the Ignite. The Ignite is a platform that combine three different technology. The first technology is, what we call radiofrequency is the glycolysis. It’s the body type, face type, accutile. The same stuff that we had for the last, I would say, seven years in The United States.

But but what we did, we improved that and increased the level of energy by something like 50% to make it faster. Now that we get the rapid experience, we decided that that’s about done. So this is one technology. The second technology is the new Morpheus. The new Morpheus devices, which can do what we call Velos.

What does it mean? It’s mean that in one shot, you can go to three different levels of of the skin. Seven millimeter, five millimeter, three millimeter. Six millimeter, four millimeter, two millimeter. Three different depth in one pulse.

And, and that’s something very unique. In addition to that, on every level, you can decide how much energy you want to apply. For example, if you want to melt set and and and contract skin, you put 50% of the energy on the on the on the subdermal depth, which is in between five to eight millimeters. And then on the dermis level, which is two to three millimeter or four millimeter, you can put 25% of the energy. And on the subdermal fat, on the subdermal, just below, the epidermis, I would say one or two millimeter, you can put only 20% of the energy.

So you can play with how to apply the energy with the new medical with the new, morpheus. We have two different morpheus, one for the face and one for the body. Both of them has the best and the scale, which did not have been the last in the in the in the in the old type of, of of, of, morphus. Morphus by itself, it’s a technology. And the third technology is called the Quantum.

The Quantum is, is a combination between the body type face type and the muscles. It’s a one cannula bipolar, that can go any depth that you want and deliver energy in pulses, but not in a fractional way, in a continuous way. One cannula that you go into the subdermal or the dermal or just below the skin in order to do contraction. You don’t you kill some set, but that’s not the main purpose for that. And the reason why we developed this camera, it’s because I’m sure that I’m sure you know that the trend today to use all kind of GLP one and all kind of drugs to kill fat.

But at the end of the day, you don’t want to stay with the loose skin. You need to protect the skin. So the quantum is the best way. And we have cannula for the face and cannula for the body. All those three technologies in one platform, which is the breakthrough, I would say, the most advanced today on the market for minimally invasive penetrating the skin.

The second device, the Optimus Max, it’s more, I would say, universal in a way that you have all the technologies, except the Mophilus, which is the new technology. You have the Lumenta Peak, which is an IPL with highest energy. You have the laser for hair removal. You have the laser for, for blood veins and blood calculation. You have the, the former and the plus for skin rejuvenation and skin contracting.

It’s more it’s more for the aesthetic surgeon, not for the plastic surgeon. It’s more for any doctors who wants to do a broad range of indication on medical aesthetic body and face.

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: Got it. Got it. Fair enough. Moshe, how should we think about R and D, you know, as you guys look at 2025 and 2026, you know, you guys have been talking about investing in R and D. And I think earlier also in your remarks today, you said, you know, you’ll manage wisely, but you’re still investing for the future.

You have women’s healthcare, you have Ignite, Morpheus, Optimus Max, you know, there are leaders and are there any other key areas that you all are focusing and that assuming when we come out of this macro level drama, you know, it’s something that we should focus on as it relates to InMode?

Moshe Mizrahi, InMode: Well, yes. We’re developing now, two new lasers. One is Erobium, for and one is QSuite for pigmentation and skin resurfacing. We’re in the process to develop, you know, a device with a new handpiece for opening the breathing tunnel, to contract the, the the the what do you call it? In in the in the in the nose for ENT.

We just introduced a device for ED for erection dysfunction, and we’re doing some studies on that. In any given time, you can find, you know, 10 new project in medical as well as aesthetic in our R and D pipeline.

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: Interesting. Interesting. Yair, if I may, pose a couple of questions to you. How should we think about where InMode’s sales rep productivity is? Obviously, you’re managing your numbers pretty well in terms of the reps in the top line.

Help us understand where you all are in rep productivity, you know, in the entire ecosystem with the other players also that Moshe mentioned. And by the same time, you know, and if I could pose another question simultaneously as, you know, you all have mentioned improving 200 to 300 beeps of gross margins, right? What are the puts and takes? How are we gonna get there as we exit 2025?

Moshe Mizrahi, InMode: Well, let me start with the first question. Of course, in 2023, ’20 ’20 ’4, and we see it now in 2025, revenue per rep went down because we did not file reps. We never file reps. We did not file reps even in the COVID time when we did not sell even one product for four months. We kept the talent in the company because we believe that once the market will start go up again, we don’t want to lose them to competitor.

Other companies adjust the cost with the expenses, they fire people. And during the COVID time, once they start recruiting them back, they lost market share. So we know that the revenue per rep are coming down in this slowdown, but the reps are the most important people, you know, where where it’s all about people, especially in this company. And therefore, it used to go up to $1,800,000 per rep in The United States. I would say today is 1.2, 1 point 3, but that’s okay.

We we we are we are fine with that. We have the money. We are not going to sacrifice. We’re still positive in cash. We’re still profitable.

We’re still cash we’re still, making money on every platforms that we’re selling, even if we sacrifice a little bit on commission and marketing expenses and so on. Regarding improving on the gross margin, we believe it will come once the momentum will start, it will come from economies of scale because we’re not growing in cost. We will have better negotiation with component manufacturer. So I believe that staying above 80% is the goal. And if we will be able to improve that by 1.1% or two, which we are working on all the time to see how what we can do in order to save another dollar from a system.

All the time, this is another, I would say, part of our DNA, and we’re doing it very well.

Yair Malca, InMode: In addition to that, The US market, once we see that start recovering, it tends to be our most profitable market, especially in terms of gross margin as well. So once we see things improving in The U. S, we should expect to see some improvement in the gross margin.

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: Got it. Fair enough. And Moshe, Yair, we are almost up on time. Moshe, you mentioned earlier about stock buybacks. And I’m curious in the current environment, given how y’all are, to me it seems from the last time you and I chatted, you guys have a much wider lens now how the different segments that you all are targeting, which is quite encouraging to hear.

Does it mean M and A? We should start thinking about M and A as something that InMode is looking at? Or you all would say, look, in the current environment, we are better off just buying stock, let’s revisit in 2026?

Moshe Mizrahi, InMode: We’re not active in the M and A. We’re not active now. We don’t have any bank that will present it. But if the opportunity will present itself, yes, we already set up the criteria. We said we will buy a company if within twelve months, it will add at least 1¢ to our EPS.

That’s what we said. And we’re still with it. We gave two proposals to two companies, but, I mean, they did not accept our proposal. I mean, we’re doing buyback. And by the way, once we finish the program that we’re doing now, I mean, altogether, we invested $500,000,000 in buyback.

And, and that’s I don’t want to say over and above. I know that some shareholders want us to do a tender offer and buy 40% of the stock at once. We don’t believe in that kind of, on in that kind of strategy for create market or shareholders value or capital allocation. But we do. We do it in the most efficient tax manner, Okay?

And, and we’re buying stock back, altogether with everything including this current program, which will accumulate to 30% of the outstanding share altogether by then, which is a high number. It’s not a slow number. And if the opportunity would present itself on the M and A side, yes, but with the right price, not to do an M and A just because to do an M and A.

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: Fair enough. Fair enough. Gentlemen, we are up on time. I’m so glad we connected, Moshe. I think so.

I’ll ping you separately because, the profile of InMode is a lot different than what I had thought about last year and we had talked. So good things happening and wish you all the best. Congrats on the progress and hang in there. I think so the drama in The US, hopefully, it’ll end sometime soon. Gentlemen, thank you so much.

Yair Malca, InMode: Thank you very much.

Moshe Mizrahi, InMode: Thanks, Arash. Thank you very much. Bye bye.

Raj Kalia, Senior Medical Device Analyst, Oppenheimer: Have a nice one, everyone.

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