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spk07: Good morning and welcome to the in-mode second quarter 2023 earnings results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the call over to Miri Sagal of MSIR. Please go ahead.
spk01: Thank you, Operator, and to everyone for joining us today. Welcome to InMode 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 Mizrachi, Chairman and CEO. Moshe, please go ahead.
spk04: Thank you, Miri, and to everyone for joining us. With me today are Dr. Michael Kreindel, our Co-Founder and Chief Technology Officer, Yair Malka, our Chief Financial Officer, Shakila Kani, our President in North America, Dr. Spiro Tarduro, our Chief Medical Officer, and Raphael Liekermann, our VP of Finance. Following the prepared remarks, we will be available to answer your questions. 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 reach over 1,600 units, and the numbers of disposables sold totaled 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, InMod is one of the only companies in the space where its founder are still actively involved in the management and the ownership. And I believe that our strong involvement and commitment is part of InMod DNA. InMode innovation support our growth and lead to a solid brand recognition within 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 Morpheus 8 technology with new features, a new hand-free 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, InMod 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, it will 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. I would like to turn the call to Shaquille, our president in North America.
spk10: Shaquille. 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. Envision, 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. Morpheus 8 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?
spk05: Thanks, Akhil, and hello, everyone. Thanks again for joining us. Inmo 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 gap base. Second quarter sales outside of the U.S. 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%. Present 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. Gap 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 59 cents per diluted share in the second quarter of 2022. Once again, we ended the quarter with a strong balance sheet. As of June 30th, 2023, the company had cash and cash equivalents, market red 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 dilution between $2.62 and $2.66. I will now turn over the call back to Moshe.
spk04: Thank you. Thank you, Yair. Thank you, Shaquille. 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.
spk07: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question is from Matt Taylor with Jefferies. Please go ahead.
spk02: Good morning. This is Mike Sorcona for Matt. Thanks for taking my questions, and congrats on a nice quarter. I just first wanted to start with, you know, you continue to have very strong growth in consumables. Can you just talk about, you know, how you view the sustainability of that demand, particularly in the event of any macroeconomic headwinds, and maybe comment on what you're seeing so far through July? Sure.
spk04: Well, hi, Matt. This is Moshe. As far as consumable and the use of consumable, the beginning of this quarter looks strong, although I have to say that we have seasonality in our business, and people sometimes do not like to do a static procedure in the summertime. They do it before the summertime. And this is why Q2 was very strong as far as uses of disposable, which means more procedures were done. But as of now, almost the end of the month of July, we don't see a slowdown. We see it continue to grow. That means that doctors are still promoting the minimally invasive and the ablative, the Morpheus, very strongly. And it also depends on the numbers of Morpheus and minimally invasive system that we sell, which is growing as well. So we might have a nice number in Q3, but I can assure you that Q4 will be much higher than what we see today.
spk02: Got it. Thank you. That's really helpful. Talking about the number of systems you sell, I was hoping you can also give us an update on you know, how the capital equipment environment is holding up. Maybe just comment on what you're seeing in terms of trends in demand. And do you see any changes on the margins in terms of, you know, doctors' ability to finance these systems, particularly as rates continue to increase?
spk04: Okay. I will ask Shaq to answer for North America, and then I will add some on our W. Shaq, please.
spk10: Yeah, hey, good morning, Mike. So, you know, we've definitely seen industry-wide, you know, that rates obviously have increased. We haven't seen much of an impact on demand, which is good. But we've gotten a little creative in terms of getting a couple other sources. We tried to get ahead of the game. We've seen this happen, you know, every four or five years. something tends to come up like this, but it's how do we navigate around it? So we definitely have looked at some other sources, which has not slowed things down dramatically, but things are a little, you know, a lot of the financing companies are looking for a little more information, things that we wouldn't have done in the past, but we've already implemented a process so that we could kind of keep the ships sailing. So with that being said, you know, I'll hand it over to Moshe. But from our perspective in North America, you know, we've definitely seen some things, but we've been able to adapt to the environments.
spk04: Okay. In our W, the numbers of doctors who buy a system with the least package is not as high as in the United States. But what we managed to do from the beginning of the year, we have one bank in Europe, who is now working with country by country in order to put together a lease package plan for each country. We started with Spain, and we're going to Italy and to all of our subsidiaries, and we might have some of our distributors as well. So, you know, our W grew this quarter 21% compared to the second quarter in 2022. And I believe that financing is still an issue, especially with the high interest rate, but we manage very well.
spk02: Okay, great. Thank you so much for taking my question.
spk07: The next question is from Matt Mixick with Barclays. Please go ahead.
spk11: Great. Thanks for taking the question. Can you hear me okay?
spk03: Yes.
spk11: Terrific. So a couple of questions, if I could. So first, an image to follow up on sort of the current tone of the market and more specifically kind of the seasonal cadence for the back half in terms of system sales. If you can maybe give us any sense of whether, you know, the strength in Q2 eases here in Q3 and, you know, rallies in Q4 or, you know, any color either regionally or across your different systems that, you know, that you could provide, as well as on some of the spending and investment that you're making in ophthalmology, for example, and sort of, you know, entering new specialty areas. Is that a, you know, I'm not talking about 2024 in detail, I'm sure, but should we expect those spending levels to continue through year end and into 2024, or any color you can provide on that? And I have one quick follow-up, if I could.
spk04: Yeah. Well, the medical aesthetic and aesthetic surgical industry has some seasonality. Although in 2021 and 2020, just because the COVID, we did not see the same seasonality. For example, in 2020, the Q2 was a very tough quarter because of the COVID and we didn't do well. But everything, when the market opened in Q3, which is relatively should be a summer time, which is slower, we saw, you know, a big jump. And the same in 2020, 2022, just because of the COVID, we did not experience the same seasonality. And that's something we need to say. But overall... In 2023, I believe the seasonality will come back. And the seasonality in medical aesthetic is Q1 is usually Q is Q softer, Q soft Q. Q2 is relatively strong. Q3, because of the summer, Europe and also the United States, Europe and the United States is a little bit slower. Although Asia is, and Latin America are not experiencing exactly the same seasonality. For them, Q3 is relatively strong, and Q4 is a strong quarter for everywhere, I mean, all the territories. In 2020 and 2021, We experienced increase compared to Q2 in the revenue. We don't have enough information to judge right now what will happen in Q3 2023 worldwide. From what we see, we started very nicely with all the territories. What will happen in the months of August, which is usually the tougher months, is yet to see. Now, Shakir, do you want to add something on North America?
spk10: Yes, sure. So, you know, as Moshe was saying, you know, Q3, typically, you know, once we clear our funnels, you know, the first couple weeks of July and the first, basically the first two to four weeks of July are spent, you know, starting to build back up the pipeline. So, with that being said, as Moshe mentioned, it's a little hard for us to give you any indication of how things are going. This is what we've you know, many of us on the management team have experienced for over 15, 20 years in the industry. So we're kind of used to it, but you just, you know, like as Moshe said with COVID, we didn't know what to expect in Q3 was stronger than Q2, which I don't think has really happened in many places, but we feel like the demand overall, at least in North America is stronger than ever. As I mentioned before, the product and brand awareness is definitely helping, And, you know, you'd ask the question in terms of envision and continuing to spend. You know, Moshe doesn't like using the word spend. He likes using the word investing. It makes him feel better. But with that being said, you know, we're definitely going to invest in that market and, you know, as I mentioned earlier, in hiring new talent as well, but also in penetrating more of those specific to that vertical itself. Does that make sense?
spk11: Yeah, yeah. No, that's helpful. And just, you know, it sounds like we should expect those things to kind of continue behind those businesses into 2024, understanding that you're not giving in.
spk04: Absolutely, absolutely.
spk11: Okay, great.
spk04: Don't forget that the ophthalmology platforms were introduced in Canada. and now soft launch in the U.S., but we have not started in our W, not in the other territories. We're waiting.
spk11: Got it. Super helpful. Now, the follow-up just is on, you know, you've talked before about the competitive environment. Would love to get your, you know, an update as to sort of what you're seeing, what you expect to see. You know, if there's demand, are you having to sort of fight for it any more or less than you did? a year or two ago, you know, any color you share there would be helpful.
spk04: Spiro, I believe you should answer that.
spk10: I'm not sure Spiro has a connection problem, so I'll handle that. In terms of competition, yeah, in terms of competition, yeah, I wouldn't say it was ever easy, or I don't think it will ever be easy. And if that ever happens, I'm sure we'll all be pretty happy about that. But, you know, we've definitely, as I mentioned, in terms of us investing in brand awareness, things like that, it's made it a little easier, I would say. And, you know, a lot of the competitors, you know, they're going to have different strategies and everyone's going to continue to sell, you know, competition breeds awareness. So we're of the philosophy that if everyone's doing well in our business, it's better for everybody, you know, rather than taking a different approach trying to to take down a giant, which a lot of the competitors try to do. But that's not how we approach things. So from our perspective, the better the industry does, the better it is. And we feel like consumer demand, but also coupled with physician demand for the need to actually incorporate some of these technologies into their practices for patients additional revenue, income, so on and so forth, is gonna continue driving this business. And, you know, it's on us to continue innovating and providing them with the appropriate tools and technology so that they're able to do that. And, you know, that's going to differentiate things. We have a user meeting coming up in August in Chicago. And, you know, I think we have over 600 practices signed up every year. It's great. We try to, you know, give them the ammunition that they need as part of their practices, you know, along with our post-sale support team who've done an incredible job. So our goal is, you know, we try to equip our people with what they, our customers with what they need. what they need from a technology perspective, but also from a marketing perspective and how to help them be successful. We try our best at it. At least we can't guarantee anything. But, you know, as far as the competitive landscape goes, I think it's pretty strong right now demand-wise. I don't know if some of our competitors have made some of the changes that they may have needed to in terms of financing and how to handle that. But, you know, we're a few steps ahead, I believe. Okay. Thank you.
spk07: The next question is from Caitlin Cronin with Canaccord Genuity. Please go ahead.
spk06: Hi, everyone. This is Caitlin. I'm for Kyle Rose. And congrats on a great quarter. Just a couple questions. Starting with Empower, how's the continued launch going and any updates to expectations? And have you begun hiring any Empower-specific reps? Where are we from like an OUS launch and approval standpoint on that? And I have a follow-up.
spk04: Okay. Well, I believe the Empower is growing. The Empower search is growing. We will not release numbers exactly because we're not yet ready to do it, but we see some growth on the Empower platform as well. Regarding the indication for SUI, we have a discussion with the FDA on the protocol. They asked us to do some additional proof of concept study, which we're doing right now in Columbia. We will come back to them with the results to finalize the protocol, hopefully before the end of the year. and then we will file an IRB to do the study in the United States with, of course, approval of the FDA. We will conduct a study. So I believe we should not see – we will not see any clearance before sometime toward the end of 2024. But we do have clearance on the VTON for all kind of – women health indication on the platforms, and currently we're marketing the platforms with those indication. In addition, we're developing additional handpiece for the Empower. which again now we're doing some proof of concept study. After that, we will do a real study approved by the FDA. This is a little bit longer process with women health, but we're spending a lot of money and investing in this technology.
spk10: And, Caitlin, just to add to that, to what Moshe was saying, you know, the one thing that we have noticed is that a lot of the competitors have, you know, and we've talked about this in the past, but they've kind of drawn out of the market. And so we do see this as a nice little opening where we're trying to, you know, capitalize on that, but, again, doing it the right way, as Moshe had mentioned.
spk06: Awesome. And then just a quick question on Evoke. Have you launched the next generation of the product yet? Thank you.
spk04: Yeah, we developed the next generation with additional power and additional, I would say, energy, different energy. It's not yet on the market. We are now finalizing the last, I would say, fine-tune of the product. Hopefully, it will go to production this quarter, and we probably will launch it sometime toward the end of the year.
spk07: The next question is from Jeff Johnson with Baird. Please go ahead.
spk08: Thank you. Good morning, guys. Just maybe if I could tick through two or three quick ones here. The international unit sales, that 966 number was definitely a strong number. Anything in there one time in nature, you know, you went direct and it sounds like Japan. And I think you said one other market that I wrote down that I forget now. But did that have any stocking orders to it? Were there any new distributors that had stocking or is that 966 a clean number? And And if it is, you know, we tend to think of fourth quarter being the peak every year. Should we think that you could still sell more than 966 units as we get into the fourth quarter of this year or get a strong number here in the second quarter? Thanks.
spk04: Well, in the international, you know, the international is not one market. On the international market, there are 27 languages and more than 27 regulatory bodies that we need to deal with. And, you know, some claims on one country are not applicable to another country. And some products need to do some modification because of regulatory issues. So dealing with the international market is country by country, territory by territory. We're currently heavily investing in Asia. with a lot of marketing activity and a lot of training, and this is the reason why we opened subsidiary in Japan, because we believe Japan should be a good market for us. It's usually a good market for medical aesthetic, and our distributor in Japan, they did well, but not according to our expectation. So Japan will be another country. In addition, China, China is opening up again. And as you know, we have a company in China, in Guangzhou, which we have established before the COVID. But we did not operate it because of the COVID. Nobody could have gone and visited China. So now we are considering to see how we can go direct in addition to what we do with distributors. Because in China, you cannot use only one way of distribution. It's a very complicated country. depend on the territory. Even in China, you need to know five different languages and five different operator manuals. But we're going closely. Latin America, again, we are investing in all the countries. This year, we will have the first user meeting in Latin America in San Paolo in October, 500 doctors, which is very important. We're covering all the countries right now, nine countries in Latin America. We signed the last contract a month ago. And we're working on regulation again, country by country, because the regulation in Brazil, which is a visa, is not the same regulation in Colombia. And you have to deal with each regulatory organization or regulatory body by itself. In Europe, as I said in my speech, we just established a subsidiary in Germany, and we intend to start operating the subsidiary sometime in the fourth quarter. We hired a managing director. there, and hopefully we will start interviewing some direct salespeople. By the way, when we go direct, sometimes we don't sell more systems, but we recognize twice as much dollars, because when you go direct, you recognize the full value and not the transfer price. And that's important. And also important, when you go direct, you fill the market. You talk with the doctor. You know what they want, what are their unmet needs. And it's easier. So I'm not suggesting that we will go, we are selling in 92 countries. We will go direct in 92 countries. In certain countries, we have a distributor that is doing a good job. In the future, we might offer them to become partner 51% so we can work together. But slowly and gradually, we are improving our position in Latin America, Europe, and Asia.
spk05: I would like to add that it usually takes some time from the moment we open a subsidiary until the moment we start to see a significant contribution. So to answer your question, Jeff, there was no one-time in the international market or at all in Q2. It was all normal course of business. Of course. Good.
spk08: Yeah, no, that's helpful, both of you. Thank you. Again, a very solid number, so congrats on that. And then, you know, I don't know if Spiro was able to reconnect or Dr. Kreindell, maybe this is for you. I'm not sure. But I just want to make sure I'm understanding the women's health care strategy here. I feel like my understanding has gone back and forth a couple different times on this. I thought when we spoke in Miami just a month or two ago, the focus was going to remain primarily on kind of cash pay women's health care on the non-reimbursed side. You know, I know you've got now this proof-of-concept study going on SUI. You obviously acquired the by these patents. You know, one, I guess, Yair, for you, can we stay sub-3% R&D as a percentage of revenue if we go into these more formalized, maybe bigger clinical trials? Is that $3.5 million, $4 million a quarter still the right run rate for R&D spend as we get into 2024? But more importantly, are you going to pursue some of these maybe costlier, you know, I don't know if they're higher risk, but at least more reimbursed side of women's health care indications? Or is the focus primarily going to stay on kind of that rejuvenation, wellness, the non-reimbursed cash pay side of women's health care? Thanks.
spk04: Well, I will answer that. I will answer that. This is Moshe. Definitely we want to go to some indication that we can use reimbursement. But it's a process. The reason why we're doing, we're trying to do, but it's a long process, to get FDA approval for U.N. incontinence, when all the companies until now failed, including Viviv, after $250 million of spending, They bankrupt and we just bought their IP. The reason why we're doing it is because this is the first stage toward getting a reimbursement code. In order to get a reimbursement code, you need to be FDA approved. You need to wait. You need to publish five studies, five independent studies, and you need to go and negotiate with the insurance companies. We're in the early stage of that, but that's one of our, I would say, strategic goals long term.
spk08: Moshe, just to follow up there, the $250 million that R&D spent, I mean, again, you're spending, I don't have your model in front of me, but like $15 million a year on R&D. Is there a number that has to be a heck of a lot bigger than $15 million, even if it's not $250 to go after SUI, or can this be done somewhere in that low to mid-single-digit percentage of revenue for R&D spend over the next few years?
spk04: We do not save money on R&D. We do not save money on R&D. We spent as much as needed. I mean, hiring another 25 engineers will not give us more productivity. We have a great engineering team in Israel covering electronic engineering, software engineering, clinical engineering. mechanical engineering, regulation, et cetera. And, you know, you can judge by yourself. In the last two years, we have launched to the market more than the entire industry altogether. And we're coming with two platforms every year. And as I stated in my speech, in the next 12 months, we will come up with four new technologies on existing technologies upgrade or some new. And we will continue to do it. I do not understand why people measuring R&D by spending or percentage of sales. That's not the right measurement. The measurement of R&D should be on the productivity of the R&D. And I think that EMON proved itself in the last, I would say, four or five years, coming to the market with the best product. We did not fail even with one of them in the market successfully with the R&D that we have. So just say, hey, please increase your R&D from 3% of revenue to 7% of revenue will not make a difference. It will create some kind of a mess. We know how to manage R&D. It's done in Israel. I believe we have the best R&D team in this industry worldwide. Worldwide. And the proof is in the pudding. Look at the products that we're coming with every year. Look at the success of them. Look how people are happy with them. For example, Fraction RRF, Morpheus, four years in the market. 270,000 disposable in the last quarter. I mean, it will not happen unless you have good R&D team, productive, and the definition what do you want to develop is right. I mean, not just develop something. I'm looking on our competitors, and I see that the new products that they came to the market, some of them are buying products from Korea, just give it a new name and bring it to the United States, and some of them are repackaging old technologies in a nice box as a new product. We are coming with new indication year over year. either a platform, a handpiece, a combination, et cetera. And that's the competitive advantage of InMode.
spk08: Understood, Moshe. I don't mean to get you on your soapbox, and it wasn't meant as a critique. I'm trying to understand where R&D is going long-term and how you can continue to innovate at these levels. And so it's more understanding that and applauding that, not critiquing that. But thank you for that. No, Jeff.
spk10: Yeah, Jeff.
spk08: One more thing I wanted to tell you.
spk04: One more thing I wanted to tell you, and this is, I mean, coming with new products to the market, you need to take into consideration your existing portfolio. You don't want to cannibalize it too fast. So it all depends. what do you bring, and what kind of new indication or new procedure, how it will be in the full portfolio system. There's a lot of issues to be discussed and decided before you define what product you want to develop.
spk10: Hey, Jacques, just to add some color here, it's Jacques. You know, obviously you can tell that Moshe's got a lot of passion for this because he's an engineer by trade. And so what he's saying essentially is that we'll do what we need to do in order to get, you know, what we need to get. However, the measure, as you mentioned, shouldn't be from, from a, you know, how much we're going to spend. It's more about what are we going to do? What do we need to do? I think there's a lot of companies that get into this and, you know, there's a reason that we were able to scoop up some of the IP from the beef, right? Cause they're no longer here. But I think for us, it's, we've always been about staying power and longevity. And so, um, You know, our engineering team is obviously strong, but we're not going to just, you know, multiply spending. I tried to warn you guys earlier that Monke has a problem with the word spending versus investing. So Monke will wholeheartedly invest when something makes sense, and that's what we plan on doing in the women's health and wellness market. Thanks, guys.
spk07: The next question is from Mike Mattson with Needham & Company. Please go ahead.
spk03: Yeah, thanks. Just on Envision, I think you talked about the dry eye FDA clearance coming in the third quarter. Can you just give us an update on that? And then, you know, how important is that to driving sales of Envision?
spk04: Well, you're right. We thought that we would start the study on the third quarter. I hope it will be. We're in a very loud stage of the FDA approval of the protocol. We did a pre-submission to the FDA where we suggested this is the protocol. We had a long Zoom call with all the team in the FDA ophthalmology department. We agreed on a few things. They asked us to send a second version of the protocol. of the protocol, which we're preparing right now, and hopefully by the end of this month it will be filed with them, and then doing an IRB. So sometime in the middle of this quarter, we already have the doctor that will do the study, pilot study was done in Israel and other countries. We know that it is working, and we'll take it from there. And once we finish the study, we'll submit to the FDA, hopefully before the end of the year.
spk03: Okay, got it. And, I mean, do you think that that's an important feature to the ophthalmologist when they're considering whether or not to buy the product and I mean, are they willing to kind of, you know, buy it now with the knowledge that that's, you know, going to happen at some point, you know, in the six- to 12-month period or something?
spk10: You know, so what we've typically seen in the past with all of these technologies, not even just specific to the ophthalmology community, is that if you have physicians who are getting good results, they have happy patients, and they're generating some good revenue from it, they do the selling for us. And it's just simply because they believe in it. They're doing well. And as long as they're getting the results, which we are seeing 100%, they will do the job for us. Seeing that it's a little earlier, we do anticipate continuing some of the revenue growth and, you know, using it as a driver, obviously, here. But that's kind of the most important thing when you think about this is, okay, if we do launch something before, you know, a study like that that we were talking about, you know, we're in the process of working on getting going, do we have those other check marks, you know, that we can put into place? And as of this point, when I only see it getting better, we do.
spk04: One more thing I wanted to add here, which is important. At the end of the day, we are an aesthetic company. So every platform, including then vision, will have some hand pieces to do aesthetic. So the ophthalmologist can do periorbital wrinkles with Morpheus. he can do skin tightening or full skin rejuvenation with the Lumeca, which are approved indication by the FDA. So for him, he has one modality to do dry eye and two or three more modalities on the same platform to get more money from the customers, private money on, you know, skin rejuvenation, full face rejuvenation, Peri-orbital wrinkles, et cetera. At the end of the day, it's a money machine.
spk03: Yeah, okay, I understand. And then just one of the things you called out in terms of the increased sales marketing spending was DTC. You have a DTC campaign, I guess. So can you maybe just talk about that and kind of where you're sending? I mean, is it kind of social media? Is it, I guess, celebrity endorsement? I don't think you're doing any TV advertising, but maybe I missed that.
spk04: Everywhere, everywhere, all the way from billboard to social media, website, B2B, B2C, meetings with doctors, seminars, conferences, doctor conferences, you know, study publication, everything.
spk05: And no TV, no TV at the time.
spk10: We typically choose to diversify when we do these things, and then we get a metric based on where we try and attempt to track what's being successful and where money is not being spent the right way, and then we double down in areas where we're seeing a good return.
spk04: Yeah. Okay. Thank you. And we do have random ambassadors. All right. Okay.
spk07: The next question is from Ryan Barocas with SVB Securities. Please go ahead.
spk09: Hey, this is Ryan Barocas from UBS on for Danielle today. Thanks for taking our questions. So first one from us here is on capital allocation. So congrats on the recent acquisition of IV patents. Just wanted to get an update on your capital allocation priorities as a whole. Is your appetite still as high as it's been in recent quarters despite these patent acquisitions, and can we expect more IP and smaller type deals, or is it still possible we see a larger size deal in the near future?
spk04: Well, I would say two things. One, if the opportunity will present itself to buy more IP, which relates to our business, and enhance our IP portfolio or position, we will do it. We did one license with the University of California on something which also relate to women health. We bought the entire portfolio of Viviv, not for big money. So, I mean, it's not something that we need tens of millions of dollars. We will not spend that kind. Now, regarding capital allocation, we are exploring all the time M&A opportunities. We are currently working with few banks, none of them exclusive, none of them exclusive. We open it to every bank who can come up with something. We do a quick check, and if something looks okay to us, we will continue to search and explore and do some diligence. I cannot report on something that will happen in the next month or two, but this is the plan.
spk09: Great. Thanks, Moshe. And then one last one for me on the capital environment and potential upgrades for new technology for your customers. So we've heard from other capital intensive companies highlight a higher mix of leasing as a percent of their system placements. Just curious if you're seeing the same dynamic and then with the new technologies for your customers on these leasing arrangements, are there technology obsolescence clauses that would allow customers to upgrade to your new technology over the next 12 months, or would this just be a simple software update on existing systems in the field for customers to access this new technology? Thanks so much.
spk10: Sure, sure. So, you know, we haven't, you know, as far as the environment goes, I touched on that earlier from the leasing perspective, nothing's really changed in terms of what percentages are finance through leasing companies versus, you know, cash deals, so on and so forth. It's pretty much status quo. So hopefully that handles that there for you. But when it comes down to the actual, the actual leasing side of things, you know, your average lease is about five years on average. And so by that time, because, you know, as Moshe had mentioned earlier, we introduced, you know, we're trying to introduce at least two, you know, platforms or upgrades to the market every year. We're well ahead of that. In terms of devices that physicians currently own or currently lease, we've actually been the one company that, at least to my knowledge, that's gone in and several times we've provided certain upgrades for software at no cost, things like that. If there's hardware, we might have a certain cost to it, but we're very fairly priced, I believe, based on the history of this market. So from that perspective, when you look at the leasing side of things, these companies Thankfully, the way that Mishka and his engineering team designed these things They're pretty stable. So, you know, at least from a service standpoint, it's not an issue. But in terms of obsolescence, there's always a way for us to upgrade or add on. But as I mentioned, by the time a physician is done with their five-year lease, they're ready to move on to another piece of technology. And our goal is to obviously, as I mentioned earlier, provide them with the tools and new technologies and innovations that they can actually add into their practices to better their treatment outcomes and revenue results from these devices. Does that make sense?
spk09: Yeah, great. Thanks so much.
spk10: Sure.
spk07: This concludes the question and answer session. I would like to turn the conference back over to Moshe Mizrahi, Chairman and CEO, for any closing remarks.
spk04: Thank you, Operator. Thanks to all the team that were with me on this call. I want to thank again to all of our employees and their families around the world. I want to thank all of our shareholders. Some of them have been with us for many years. We really appreciate that. I want to thank all of our suppliers, subcontractors, everybody that works with us. that bring us to this success. Without them, we cannot do it. Hopefully, we'll see all of you in the next earning call. Thank you and goodbye.
spk07: The conference is now concluded. And thank you for attending today's presentation. You may now disconnect.
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