InMode Ltd. (NASDAQ:INMD) Q2 2023 Earnings Call Transcript July 27, 2023
InMode Ltd. misses on earnings expectations. Reported EPS is $0.52 EPS, expectations were $0.64.
Operator: Good day, and welcome to the InMode Second Quarter 2023 Earnings Results Conference Call. All participants will be in listen-only mode. [Operator instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator instructions] Please note this event is being recorded. I’d now like to turn the c call over to Miri Segal of MS-IR. Please go ahead.
Miri Segal: Thank you, operator and to everyone for joining us today. Welcome to InMode’s second quarter 2023 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 earnings release also pertains to this call. If you have not received a copy of the release, please go to 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 by 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 pass the call over to Moshe Mizrahy, Chairman and CEO. Moshe, please go ahead.
Moshe Mizrahy: Thank you, Miri and to everyone for joining us. With me today are Dr. Michael Kreindel, our Co-Founder and Chief Technology Officer; Yair Malca, our Chief Financial Officer; Shakil Lakhani, our President in North America; Dr. Spero Theodorou, our Chief Medical Officer; and Rafael Lickerman, our VP of Finance. Following our prepared remarks, we will be available to answer your question. We’re happy to report a record quarter on all fronts. We announced record revenue of $136.1 million, an increase of 20% compared to the second quarter of 2022. Sales from our platforms reached over 1,600 units, and the numbers of disposable sold totalled over 270,000, the most in our company history. As part of our ongoing global expansion, during the second quarter, we established two new subsidiaries, one in Japan and one in Germany.
Establishing subsidiaries in countries where we believe we should be selling directly and not through distributor is our philosophy and strategy. Currently, InMode is one of the only companies in the space where its founders still actively involved in the management and the ownership, and I believe that our strong involvement and commitment is part of InMode DNA. InMode innovation supports our growth and leads to a solid brand recognition within a highly competitive aesthetic industry. To further secure our competitive advantage in the next 12 months, we intend to invest heavily on product development and to launch a new minimal invasive technology and platform, upgraded Morpheus8 technology with new features, a new handsfree family of platforms for face and body, and a new multi-application — applicator platforms with new technologies.
In addition, we plan to secure additional indication cleared by the FDA. There are currently eight FDA studies in process. Within the next 12 months, InMode portfolio of platforms and indication will be completely new and upgraded and we will continue aggressively enhance and protect our IP and patent. Lastly, we are happy to report that just last month, InMode become part of the Russell 2000 Index. This index is most widely quoted measure of the overall performance of small cap and mid-cap stock. Now, I’d like to turn the call to Shakil, our President in North America. Shakil?
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Shakil Lakhani: Thanks, Moshe, and everyone for joining us. We are happy to report a record second quarter, while also seeing significant growth in consumable sales. Revenue from consumables and service reached nearly 44% year-over-year growth. This is a strong indication that our platforms are being used more frequently, signifying continued demand and increased brand recognition. In vision, our non-surgical ophthalmic platform is gaining significant traction in North America. We plan to continue hiring product-specific sales reps to expand penetration into the ophthalmology market. Morpheus8 continues to be our leading technology. Overall the branding, patient demand and excellent results puts this product in a class of its own. Lastly, I’d like to thank our entire North American team for their continued hard work. I will now hand over the call to Yair for a review of the financial results in more detail. Yair?
Yair Malca: Thanks, Shakil, and hello, everyone. Thanks again for joining us. InMode generated a record revenue of $136.1 million in the second quarter of 2023, representing a 20% year-over-year increase with a gross margin of 84% on a GAAP basis. Second quarter sales outside of the US accounted for $49.5 million compared to $41.2 million in Q2 last year. We continue to see growth coming from different regions around the world, and in Q2, sales from Asia hit a new record. To support our operations and growth, InMode now operates in a total of 92 countries with a sales team of more than 264 direct sales reps and 81 distributors worldwide. Capital equipment in the second quarter represented 84% of total revenue, while consumables and service revenues accounted for the remaining 16%.
Sales and marketing expenses increased to $51.1 million in the second quarter compared to $39.7 million in the same period last year. This increase is attributed to the addition of new sales representatives, as well as investment in direct-to-consumer advertising campaigns and hosting in-person events to support the company growth projection. Service compensation accounted for $6.5 million in the second quarter of 2023, a slight increase compared to $6.4 million in the second quarter of 2022. GAAP operating expenses in the second quarter were $57 million, a 26% increase year-over-year. On a non-GAAP basis, operating expenses were $51.1 million in the second quarter compared to a total of $39.5 million in the same quarter of 2022, representing a 29% increase.
GAAP operating margin for the second quarter of 2023 was 42%, compared to an operating margin of 43% in the second quarter of 2022. Non-GAAP operating margin for the second quarter of 2023 was 47%, compared to 49% for the second quarter of 2022. GAAP diluted earnings per share for the second quarter were $0.65, compared to $0.52 per diluted share in Q2 of 2022. Non-GAAP diluted earnings per share for this quarter were a record $0.72, compared to $0.59 per diluted share in the second quarter of 2022. Once again, we ended the quarter with a strong balance sheet. As of June 30, 2023, the company had cash and cash equivalents, marketable securities and deposits of $629.4 million. Before I turn the call back to Moshe to take your questions, I’d like to reiterate our increased guidance for 2023.
Revenue between $530 million and $540 million, non-GAAP gross margin between 83% and 85%, non-GAAP income from operations between $238 million and $243 million, non-GAAP earnings per diluted share between $2.62 and $2.66. I will now turn over the call back to Moshe. Moshe Mizrahy Thank you. Thank you, Yair. Thank you, Shakil and thanks to all of our employees around the world. I’m sure that most of them and some of them are listening to us today. It’s important. Operator, we’re ready for Q&A session.
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