OPENLANE, Inc.

Good day and welcome to InMode's second quarter 2025 earnings results conference call. All participants will be in the 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, you may press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Mary Seger, CEO of MSIR. Please go ahead.

Thank you, operator and everyone for joining us today. Welcome to InMode's second quarter 2025 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 visit the investor relations section of the company's website. Changes in business, competitive, technological, regulatory and other factors would 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 turn the call over to Moshe Mizrahi, InMode's CEO. Moshe, please go ahead.

Thank you, Miri, and to everyone for joining us. With me today, Dr. Michael Kreindl, our co-founder and chief technology officer, Yair Malka, our chief financial officer, and Rafael Likerman, our VP of Finance. Following our prepared remarks, we will all be available for answers to your questions. In the second quarter, we continue to navigate a challenging medical aesthetic market, especially in North America due to reduced personal spending. This environment results in fewer treatment and less capital investment from physicians, consistent with the microeconomic trend of recent quarters. Building on the strategy we outlined last year, we have started restructuring key parts of our sales team to drive deeper market penetration. We have begun by appointing a specialized manager and dedicated sales team focused on the envisioned platforms for the ophthalmology market. At the same time, we are strategically expanding our global footprint with new direct operations in Thailand and Argentina. These offices will enhance our local presence, improve customer support, and streamline operations compared to walking through distributors. Looking ahead, we are hosting a user meeting in late August to officially launch our new platforms in the wellness space, focused on increased blood circulation and pain relief for the urology community. We conducted a soft launch during Q2 and began introducing the platforms to selected users and gathered early feedback. The full commercial rollout will take place at the August event, and we anticipate initial revenue contribution in the fourth quarter. In closing, we will continue to navigate the current market challenges. We remain confident in in-mode offering and brand recognition, backed by strong balance sheets and diversified portfolio and cutting-edge technology. We are well positioned to continue leading the minimally invasive aesthetic and wellness industry. Now I would like to turn the call over to Yair, our Chief Financial Officer.

Thanks, Moshe, and hello everyone. Thank you for joining us. I would like to review our Q2 2025 financial results in more detail. Despite global headwinds and the challenging macroeconomic environment, Inmo generated revenues of $95.6 million. As a reminder, when comparing -over-year results, last year's quarterly revenue of $86.4 million excluded $16.2 million in pre-orders for new platforms which had not yet been delivered by end of Q2 2024. Our minimally invasive platforms accounted for 84% of total revenues this quarter. Sales outside of the U.S. accounted for $45 million, or 48% of overall sales, and 11% increase -over-year. Europe was the largest geographical revenue contributor, reaching a record of $23 million. Gross margin remained strong at 80% on a gap basis, consistent with Q2 2024. These industry-leading margins continue to underscore the unique value that our platforms provide. Non-GAAP gross margins were 80% in the second quarter compared to 81% in Q2 2024. As part of our global expansion, we currently have a direct sales force of over 297 representatives and distributors coverage in more than 74 countries. Sales and marketing expenses increased to $47.5 million from $45.1 million in the same period last year. The -over-year increase reflects continued investment in our sales team, resulting in higher salaries and travel and entertainment costs. We also saw increased spending on trade shows and other marketing activities. These were partially offset by lower share-based compensation which declined to $3.4 million from $5.2 million in the second quarter of 2024. GAAP operating expenses in the second quarter were $53.6 million, a 5% -over-year increase. On a non-GAAP basis, operating expenses were $50.5 million in the quarter, up from $46.3 million, a 9% increase -over-year. GAAP operating margin was 24%, up from 21% in the second quarter of 2024. On a non-GAAP basis, operating margin reached 28% compared to 27% last year. GAAP net income was $26.7 million, up 12% from $23.8 million. On a non-GAAP basis, net income was $30.1 million, up from $29 million. GAAP diluted earnings per share for the second quarter were $0.42, a significant increase from $0.28 in Q2 of 2024. Non-GAAP diluted EPS was $0.47, up from $0.34 per diluted share in the second quarter of 2024. We ended the quarter with a strong balance sheet. As of June 30, 2025, the company had cash and cash equivalents, marketable securities and deposits of $510.7 million. This quarter, we in more generated $24 million in cash from operations, from operating activities. If current US tariffs remain at 10%, we expect gross margins to be by approximately 2% to 3%. We continue to closely monitor the situation and will adjust our forecast and strategy as needed. Before I turn the call back to Moshe, I'd like to reiterate our guidance for 2025. Assuming the slowdown in our industry continues and interest rates remain at current levels, we expect revenues between $365 million to $375 million, compared to previous guidance of $395 million to $405 million. Non-GAAP gross margins to be the same as in previous guidance, between 78% and 80%. Non-GAAP income from operations between $93 million and $98 million, compared to previous guidance of $101 million to $106 million. Non-GAAP earnings per user share between $1.55 to $1.59, compared to previous guidance of $1.64 to $1.68. I will now turn over the call back to Moshe.

Thank you, Eir. Operator, we're ready for Q&A. Please.

Certainly, thank you. 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. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Matt Mixick with Barclays. Please go ahead.

Hi. Thanks so much. Thanks for taking the question. So maybe if you could talk a little bit about two things. First, I think there were some dynamics in Q1 that drove, I think what you described at that time, some slight, nearly below expectation results for Q1 that didn't quite warrant a reduction. Some of that here continued in Q2, and just wanted to get a sense of the cadence of what that looked like. And one of those great yields to uncertainty towards the end of March may or may not have influenced buying behavior, timing of purchases, and that sort of thing. And just wondering, just qualitatively, or if you could quantitatively describe how that compares to Q2 and the back end, particularly at Q2 when you close most of your console deals. And then I have just one quick

follow-up. So as you remember, we discussed it after Q1. We did come a little below our expectation in Q1. And same thing happened here in Q2. So now we have already two quarters behind us, and we kind of missed a little bit both of them. Not drastically, but definitely we saw some weakness in Q1 and also in Q2. So taking this into consideration, looking ahead to the remainder of the year, with all the uncertainty that we are seeing, we thought it's the right thing to do to make this one-time adjustment to our guidance. Does that answer your question?

Yeah, I mean, partially, and thank you for that. I just was trying to get a sense of, you know, there seemed to be quite a bit more uncertainty in March and April than there is now, frankly, in capital purchases or business investment or anything. And I'm just wondering, any of that came through or not in what you saw in the way the quarter shaped up, even though both, you know, at the face of it, were slightly below expectations. Any difference in that way, or does it just look like two quarters that didn't quite hit what you hoped?

Well, this is Moshe. As you know, the business that we're in, medical aesthetic, has some seasonality effect. Typically, the first quarter is not very strong. I don't say it's like Q3, but it's not very strong. And Q2 is one of the strongest quarters. So, I mean, according to the seasonality model of the medical aesthetic industry for many years, the first quarter is basically 20%, and the second quarter should be 25%. So, if the original guidance was $400 million, we were supposed to do $80 million in the first quarter and $100 million in the second quarter. But we missed both quarters. In the first quarter, we did only $77 million, and the second quarter, $95.5. So, the difference between the two of them, if you calculate the third and the fourth quarter, brings us to the new guidance. But it's all, as you know, estimation. If we do better, we'll improve the guidance. But we try to be conservative as usual in order not to promise something that we're not sure we can achieve.

At the moment, we don't see any change in behavior. If that's what you're looking for, if we see any change in behavior. So, the answer is no, we do not see any change in behavior. Between Q2 and Q1, the market still continues to be challenging.

That's helpful. And then just a quick one on guidance is that, you know, it seems like you talk often about maintaining your organization, you know, in advance of an anticipation of a turn in the cycle. So, rather than, you know, top line coming down and tightening your belt to sort of hit a higher EPS number just for the sake of committing, you know, hitting that commitment, you're taking a view, it gets to sort of right through the flat part of the cycle and into the upswing of the cycle to remain invested. Just if you could talk a little bit about, you know, that strategy, if that's changing at all, if you're still committed to that and any sense or ideas that you have on the timing of when we might start to do things, pick up. Thanks.

Again, we remain positive on the long-term potential of the market. Yes, we are experiencing a temporary weakness. How long it's going to last, we don't know, but we believe at some point, the market will recover and we'll come back. In terms of making the necessary investment in some part of the world, we are expanding and going direct in more countries because we think that's the right thing to do. In the U.S., we see that the headwinds are significantly stronger than what we experienced in Europe and Asia. We don't have any concrete plan or downsize in the company. We don't need to, but definitely we are looking to make sure we have the best structure in place to stay competitive.

Sure enough.

Thanks so much.

Thank you. Our next question is from Danielle and Talfi with UBS. Please go ahead.

Yeah. Hi. Good morning, everyone. Thanks so much for taking the question. Just one question on capital allocation Moshe for you. Then I have a specific question on non-invasive and the strengths we saw there. On capital allocation Moshe, I know you guys have shared repurchasing. You still have like $600 million in cash on hand as of I think the end of June. So just maybe talk a little bit about where your priorities are, how they're changing, whether you're still exploring assets to potentially acquire. Then I'll ask my follow-up on non-invasive.

Thanks. Okay. As far as capital allocation, I believe we're giving the same answer all the time. We did $508 million of buyback in the last two years, which was a lot. I mean, if we will do additional buyback in Israel, it will require requiring 20% dividend tax. So we're considering it. I'm not saying we're not. It's one of the options. So every type of capital allocation is considered all the time and it's on the table. We don't have any acquisition on the pipeline, so I cannot announce that we're doing any acquisition this year. As far as dividend, it might, but it also requires you know, dividend tax. So basically everything is possible. We will need to see how the continue of the year will go and probably we'll make a decision sometime in the next six months.

Okay, gotcha. And then, you know, one area of strength at least relative to what we were modeling, but also I think versus last year, very strong growth in non-invasive. Just wondering what's driving that? Is it a new product cycle? Is it just customer behavior? Is that something that's notable? Is it one time in nature? Maybe talk a little bit about that in the mix of non-invasive versus minimally invasive. Okay,

well, as you know, minimally invasive procedures are relatively expensive. Either body type, face type, quantum, morphous, which can go up to eight millimeter. They are relatively expensive and they require local anesthesia either by blocking, Tumacin, another type of local anesthesia. So the range of one treatment can be in between $1,500 and $4,000 or $5,000. The non-invasive procedure are much cheaper. Laser, IPL, non-invasive RF. So we see some trend that the minimally invasive, which is relatively, you know, require more personal spending. I don't want to say go down, but the number of procedures are going down. And therefore, we see a little bit of a trend to the non-invasive handpieces and platforms. And that's what happened in the second quarter. In addition, you know, we came up with the platforms which call Optimus Max. And Optimus Max has a new type of IPL, IPL peak, and a new type of laser for hair removal and also for for blood vessels. And this platform is very successful. And therefore, this part of the market is non-invasive. Well, but yet the most, the biggest part of our business is still invasive, penetrates the skin. And either one is, it's almost more than 80%. So it's a high number.

Gotcha. Thank you, Moshe.

Thank you. Our next question comes from Michael Sarconi with Jeffreys. Please go ahead.

Hey, good morning. And thanks for taking our questions. This is Mike on for Matt this morning. I guess just to start, Moshe, some clarifying questions around your commentary on guidance. I think you mentioned with that $400 million original guide, you were a little light in one light in the first half versus those original expectations. I think you also said that's kind of the reason you lowered the guide, but you lowered it by about 30 million at the midpoint. So could you just clarify that? You know, have you also lowered your outlook for the second half?

Well, as you know, the third quarter is usually a very slow quarter, especially in Europe because of the summer time and the vacations. In recent years, we see that effect also in the U.S. market and also in the Canadian market. So basically, in order to achieve the $400 million, we thought we would do $100 million in the third quarter and $120 million or $125 million on the fourth quarter. Based on the slowdown and the slow market that we experienced in the second quarter, we don't think that that is achievable, $220 million. And this is why we reduced the budget at that target.

Got it. That's a very helpful limit. I guess, can you comment on any kind of contribution that you may have included from the urology end markets in the 4Q quarter?

It's minimal. I think it's going to be a minimal contribution. That's usually what we do with every new launch of a product. We don't count too much on contribution. It will be more symbolic than anything. And again, if we'll be pleasantly surprised, we'll take it, but we don't count on it.

Okay.

Thank you.

Thank you. The next question comes from Kaitlyn Cronin with Canaccord Genuity. Please go ahead.

Great. Thanks for taking the questions. I guess just to start and really expand on the urology question earlier, is there any more details on the urology market and the opportunity and if you'll use a dedicated sales team like you're going to do for the InVision platform?

Okay. Let's start with the urologists. As you know, we're developing a platform for the erection dysfunction, but we don't have the indication from the FDA yet. So we're launching it on a pilot level for blood circulation and pain relief. We're doing some clinical testing right now to prove the concept. And therefore, although we are launching the platforms, but eventually once we have the FDA indication for erection dysfunction, these platforms will be much more successful. Right now, we have to be very careful with how we do it and under IRB and other all kinds of regulatory procedures. Regarding the InVision, the InVision platform is for dry eye and full face rejuvenation. Again, we don't have the FDA indication approval for the dry eye yet. It's in the process. We have submitted to the FDA the protocol and we're going to prove it and start the study. We submitted all the pilot and all the clinical data that we had. Once we have the approval from the FDA for dry eye treatment with the bipolar RF, again, this platform will fly. And yet, it's in an early stage. We're not promoting it directly for the dry eye because we cannot. And every test and every study that we do is under regulatory procedures like IRB, et cetera. And those two platforms in the wellness business were in the middle of regulatory procedures and regulatory submissions. Hopefully, sometime next year they will be approved.

Great. And I think you talked about last quarter, just given the relative strength, OUS and Europe in particular, you were expecting somewhat of a larger skew in the mix to OUS versus U.S. Is that still something that's contemplated in your guidance for this year?

Yes. It is built into the guidance already. As you know, in previous years, the split between U.S. and OUS was about 60 to 65 percent U.S. and the rest is OUS. Now it's more in Q1 and in Q2, it was more 50-50 split. And that was the assumption that it will remain 50-50 for the rest of the year. And it's already built into the guidance.

Great. Thanks so much.

Thank you. Our next question comes from Jeff Johnson with Baird. Please go ahead.

Thank you. Good morning, guys. Moshe, maybe if I could follow up on some of your envisioned comments. You know, we've been out there kind of doing some checks, kind of have heard of a decent number, I would say, of luminous account conversions and wins for you guys. Would it be crazy, as Danielle asked about the non-invasive number that was strong this quarter to think that InVision also contributed to that? I know you're still waiting for the dry eye indication, but our back of the envelope map, maybe it was as much as five or 10 percent of your U.S. system sales in one in two Q, I'm sorry, could have been InVision. Would that be too high of a number? Thanks.

Uh, 10 to 15 percent. It's relatively high. I will say it's more like a 10 percent or a little bit less than that, but not more than that before we get the FDA. Now, regarding luminous, luminous has the approval on the IPL and not on the RF. Everybody knows we also have IPL on the system, on the InVision, and doctors can use either the IPL, which is approved like luminous, or the RF. But the RF needs to be done under regulatory procedures and local approvals.

All right, fair enough. And my question was, could it be five to 10 percent of your U.S. system sales, not 10 to 15? So it sounds like you're saying yes there. I just want to clarify. You think five to 10 is a reasonable U.S. system revenue for InVision for this quarter? Correct. Okay, great. And then most, sorry, Yair, you talked about no change in behavior throughout the quarter. Would that comment be applicable to both kind of, you know, the doctor side of the equation on purchasing capital and on the patient side on the procedures and consumable side? That consumables number getting closer to flat, so maybe getting, you know, a little bit of improvement on the patient demand side. But just if you could disaggregate your comment on no change in behavior across both system purchases and or patient demand, that would be helpful.

Thanks. So just one quick comment about your previous question. The CO2 device that we launched earlier this year, this one is also included in the non-invasive, and that's one of the reasons why you see this jump. Regarding to your second question, yes, it might be better to separate between the two, the trends that we see in the capital equipment. This has stayed pretty similar for the last several quarters, you know, with the high interest rate and challenging with financing and uncertainty in the market. I think you see many doctors probably delaying their purchasing decisions on capital equipment. Consumables behave a little bit differently. This is more subject to this questionary spending by consumers, and we see some challenges there. But as you said, it looks like the decline kind of plateau. So I guess we can see it as a positive that we stopped the bleeding, and hopefully when things improve, we will start seeing that climbing back up.

Thank you.

Thank you. Our next question comes from Mike Matten with Needham and Company. Please go ahead.

Yes, thanks. Just a question on the tariff impact. I think the press release mentioned the tariff rate of 10%. I thought the rate on Israel was 17. Was that lower to 10? And then just the 2% to 3% that are calling out impact to gross margin from tariffs, is that for the full year? Is there any kind of timing there in terms of hitting maybe more in the second half of the year or something?

So you're right. The original tariff was set at 17%. It was reduced to 10 on a temporary basis, and it was extended. I'm sure there is some negotiation going on between Israel and the US administration. And our assumption right now is that it's going to remain at around 10%. It can be higher. However, we are also working to see if we can make some strategy changes that will help us actually bring this even lower. So I think going with an average of 10% at this point is the right thing to do because this is what we are currently paying. And once we have updates, this way or another, we will provide an update. Regarding the 2% to 3% impact, that's on an annual basis. So probably in 2025, because we didn't have the tariffs from the beginning of the year, and some of the inventory that we already have in the US was not subject to this tariff, the impact would be lower, probably half the debt.

We basically thought that like Europe and other countries that Israel will reach an agreement before the end of the second quarter, but not yet. I believe that by the end of August, President Trump gets the deadline. I believe by then, it will be settled and probably it will be 10% or in Europe it's 15%. I don't think we'll get to 15%, but it's all guessing.

Yeah, I understand. Okay, to be clear, so the 2% to 3%, that's a fully annualized number in terms of what the impact would be if you were paying the 10% for the full year. Okay, and then just a question on the new urology system that you're launching. Can you maybe just talk about the initial labeling that you're going to have there and how you're, I guess for the urology specific treatments on it and how you're going to market that. And then this user meeting, I assume that's focused on urologists, correct? You're going to be hosting group urologists?

This particular platform, yes, it's for urologists. The development continues to get an indication by the FDA for erection dysfunction. We're doing clinical study right now in the major hospitals and in the major clinics that deal with this indication in the U.S. In the meantime, the approval that we receive for these platforms by PoloRF is basically for increased blood circulation, pain relief, and also collagen building, which are the basic three elements for erection dysfunction. Not yet with the final indication. Hopefully in the future we have. Okay, got it. Thank you.

Thank you. Our next question comes from Sam Iber with BTIG. Please go ahead.

Hi, good morning. Thanks for taking the questions here. Maybe just coming back to Europe for a second. You know, two straight quarters here of growth and capital equipment outside the U.S. Is that a reflection of a more stable environment? Are you launching new products there, taking price? And how sustainable do you think some of those trends are?

I think they're very sustainable because just to remind everyone, we started in the early years focusing on developing the North American market mainly. We were a little bit late to the game in developing the .U.S., the international market, which is what we are doing right now. We used to be a smaller player in the international markets and that's definitely one of our growth engines in the year to come. So it's very sustainable.

Okay, that's helpful. And then moving to the U.S. here, are we starting to see any kind of upgrade cycle with Ignite and Optimus Max? I know it's a question we typically ask every quarter, but are you offering discounts yet for customers to upgrade? And is there any way to quantify that contribution?

We will probably start doing it on the third quarter, trying to convert users that use the Optimus and the body type, which are both fully not similar but fully FDA approved with Ignite, which is fully FDA approved and the Optimus Max as well. We will probably start doing it in the third quarter and at the same time, we're introducing those platforms in our O.W. as well. Okay, helpful. Thanks for taking questions.

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Moshe Mizrahi for any closing remarks.

Thank you, everybody. Thank you for joining us today. I believe we covered all aspects of the financial results that we usually present. Hopefully, the market will improve in the next two quarters, especially on the fourth quarter, which is usually the strongest quarter. We're going to be there. I know that one question was asked whether or not we are cutting down costs. We're a technology company, and if we will cut down costs, that means that we will fire engineering people and good salespeople. We don't want to do it. We're adjusting our costs in the manufacturing and the logistics, but all the rest, we keep business as usual in order to jump on the market whenever the market will improve. Again, thank you for joining us. We'll see you again in the summary of the third quarter. Thank you, everybody.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.