Inmode Stock

Good day, and welcome to InMode's First Quarter 2026 Earnings Results Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Miri Segal, CEO of MS-IR. Please go ahead.

Thank you, operator, and everyone, for joining us today. Welcome to InMode's conference 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 statements 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, CEO. Moshe, please go ahead.

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; and Mr. Moshe Itskovitz, our Senior VP of Finance. Following our prepared remarks, we will be available to answer your questions.

We executed in line with our expectations in Q1 2026. In addition, we are seeing early sign of stabilization, particularly in the U.S. and believe that this quarter reinforce our confidence that 2026 is moving in the right direction.

I would like to start by reviewing InMode's progress in North America. As you know, we brought in new leadership at the end of Q3 2025, including new North American President and Vice President. While it's still early, the energy and cultural shift are already having a positive impact.

We have transitioned from our long-standing East-West structure to unified North American model, bringing Canada and Gulf Coast under the same organization. This is driving better coordination and clearer accountability. We also implemented a key structure change in January 1, 2026. The Envision team, our ophthalmology and optometry sales force now operate independently. This creates more focused model that we believe will support stronger execution over time.

March delivered particularly strong progress, reinforcing our confidence that this change are beginning to bear fruit. That said, we are looking for sustained consistency before calling it a long-term trend. On the international market, we continued to operate in over 100 countries with most of our businesses driven by our direct sales to local offices and supported by distributor partnerships.

Europe remains a strong region for us with solid performance and meaningful room for continued growth. In Asia, performance is more mixed, consistent with what we saw last year, though we are making progress in key markets, including China, where we see significant long-term potential.

Onto laser, the Pico and the CO2 laser performed well, recently introduced were meaningful contribution to our Q1 revenue performance and are strategically important for our long-term growth. They extended the range of procedures our physicians can offer and to enable combination of treatment, which are increasingly in demand. Physicians are looking for comprehensive solutions from a single partner, and these platforms support a one-stop shop office. They may put pressure on our gross margin, but they play a critical role in strengthening our competitive position and deepening our customers' relationship.

on the broader market environment, we are seeing sign of stabilization. Demand for aesthetic procedures was again pressured in the first quarter of 2026 by macroeconomic headwinds. But as we have said many times before, we believe that the demand for aesthetic procedure will not go away. It may be deferred, but it will return.

Now let me turn the call over to Yair, the Chief Financial Officer, who will talk you -- walk you through financial numbers. Yair?

Thanks, Moshe, and hello, everyone. Thank you for joining us. As announced earlier this morning, I will step down as CFO and remain with the company as a consultant for the next 6 months to support a smooth transition. After 9 years with the company, I am proud to have been part of its journey from driving growth and supporting our expansion to helping lead our transition to the public markets. It's been a privilege to work closely with our dedicated employees and build a foundation of financial discipline and transparency.

Even during recent macroeconomic headwinds, the company's strong financial position and resilience have enabled us to navigate challenges, including the global pandemic, while consistently prioritizing stability and our people. As I look ahead to new endeavors, I am confident that this discipline and long-term approach will continue to guide the company's success.

With that said, let's get to the Q1 results. Starting with total revenue, InMode generated $82 million in the first quarter of 2026, up 5% from $77.9 million in the same quarter last year. Growth in Q1 was led by strong performance in the U.S. market.

Moving to our international operations. Sales outside the U.S. totaled $38.7 million in Q1, representing 48% of total sales and an increase of 2.65% compared to Q1 of last year. Gross margin in the first quarter of 2026 was 75% on a GAAP basis compared to 78% in the first quarter of 2025. Non-GAAP gross margins were 75% in the first quarter of 2026 compared to 79% in the first quarter of 2025.

In Q1 2026, our minimally invasive technology platform accounted for 77% of total revenues. To support our operations and growth, we currently have a sales team of more than 298 direct reps and 73 distributors worldwide.

GAAP operating expenses in the first quarter were $51.5 million, a 13.7% increase year-over-year. GAAP sales and marketing expenses increased to $42.9 million in the first quarter compared to $39.7 million in the same period last year. The year-over-year increase was primarily driven by increased sales expenses tied to the restructuring of the North America sales organization and headcount expansion from 2025 subsidiary build-outs, along with higher commission expense in line with a stronger sales performance.

Next, we look at share-based compensation, which increased to $2.7 million in the first quarter of 2026. On a non-GAAP basis, operating expenses were $47.8 million in the first quarter compared to a total of $43.1 million in the same quarter of 2025, representing an 11.1% increase.

GAAP operating margin for Q1 was 12%. Non-GAAP operating margin for the first quarter of 2026 was 17% compared to 23% for the same -- for the first quarter of 2025. This decrease was primarily attributable to the increase in cost of goods and, as mentioned before, the new structure of the North America sales team implemented towards the end of 2025 and subsidiary establishments in the later part of 2025.

GAAP diluted earnings per share for the first quarter were $0.18 compared to $0.26 per diluted share in Q1 of 2025. Non-GAAP diluted earnings per share for this quarter were $0.25 compared to $0.31 per diluted share in the first quarter of 2025. As of March 31, 2026, the company had cash and cash equivalents, marketable securities and deposits of $537.2 million.

We also returned meaningful capital to shareholders, repurchasing shares in the amount of $127.4 million during 2025 and $52.7 million year-to-date under our new 2026 repurchase program, representing 3.86 million shares this year. With this flexibility, we remain well positioned to pursue a full range of capital allocation opportunities. This quarter, InMode generated $15.4 million from operating activities.

Before I turn the call back to Moshe, I'd like to reiterate our guidance for 2026. Revenues between $365 million to $375 million; non-GAAP gross margin between 74% and 76%; non-GAAP income from operations between $73 million and $78 million; non-GAAP earnings per diluted share between $1.33 to $1.38.

I will now turn over the call back to Moshe.

Thank you, Yair. Thank you very much. Operator, we're ready for Q&A.

[Operator Instructions] The first question comes from Mike Matson with Needham.

This is Joseph on for Mike. And Yair, I wish you the best in your next ventures. Maybe just a question on the next laser launch, I believe the Erbium laser. Can you remind us of the time line of that? Was that end of the year? And just comparing to the Pico and the CO2 laser, is this product more just filling a gap that can do a different procedure versus the Pico or CO2? Or is it -- maybe it's much more differentiated? Just wondering how we should think about that. And then, under the assumption that this launches at the end of the year, should we expect further impact to gross margin in 2027 from this increased mix of laser platforms?

Okay. You asked 3 questions about 3 different lasers. First, the laser that we introduced to the market in the beginning of this year, sometime in February was not Erbium, it was Pico laser. The Erbium laser is still under development. And we hope to finalize the development of the Erbium, which is developed in Israel and get into the FDA clearance sometime in the next month or 2. So basically, we hope that by the end of this year, we will have it cleared by the FDA, and we can introduce it to the market.

Now the third laser that you mentioned, the CO2, the one that we're having today and selling today, which called the Solaria, it's a CO2 laser that we buy from U.S. manufacturer with several modifications that we made it to be -- looks like and with the software of InMode. And we sell it quite nicely throughout U.S., not in Canada because they don't have Health Canada clearance to sell it [ in the U.S. ]. So this product is being sold only in the U.S.

At the same time, we are developing our own CO2, which will enable us to expand the market and the territories to almost everywhere, but that will take time because regulation today, it's a long process, mainly in Europe when you have to clear it through the MDR and not the MDD process that recently changed. Anything else about those lasers?

No, I think that's all good and clear. Appreciate that. Maybe just one more follow-up question. Just wondering how your newer direct subsidiaries, I think Thailand and Argentina were established in 2025. How have those been growing? And then could you also remind us on the time line for China? I believe that was maybe one of the next targets for this year. So maybe just what products you're targeting to get into China and then the time line of when that could happen?

Okay, let's start with Argentina. Argentina was established late 2025. It took us some time, 2 months to get all the clearances from the regulatory body in Argentina under our name in our subsidiary. Now everything is almost ready. We have an office. We have 1 or 2 salespeople. We have a clinical trainer. We have a manager. And hopefully, Q2 in 2026, we will see some results.

Until now, it was more like a setup organizing all the regulatory clearances. Hopefully, Q2 in this year, they will start delivering sales as well. Argentina is not very big country compared to Brazil and others, but we believe that there is a market there. There are major changes in the macroeconomics in Argentina recently. And we felt that this is the best time to establish a subsidiary there and go direct.

Regarding China. In China, we continue to work on the medical field with our distributors. But we have decided -- I don't know if everybody knows, but during the COVID, we have established a company in Guangzhou, which was a sleeping company for all the time until today. And we decided right now to use this company, which is fully owned by us to become the spa and aesthetic arm of InMode in China.

We hired a manager and -- who is well acquainted with the spa and the aesthetic -- not aesthetic, I would say the cosmetic more or less in China, and we're developing right now special products to distinguish the product line from the medical in order to penetrate this segment of the market in China. But it's not in full operation yet.

[Operator Instructions] Our next question comes from Matt Miksic with Barclays.

So, on ophthalmology, I was wondering if you could -- and I've been hopping around a few call, so apologies if it's already been covered, but maybe an update on how the U.S. sales reorg and management structure is driving that growth, what your plans are there? Maybe what some of the early results you've seen there and some of the upcoming milestones? And I have one quick follow-up.

Yes. Well, I'm sure everybody knows that we have a platform, which is called the Envision for the ophthalmology and optometry. By the way, 95% of the customers are not ophthalmologists, they are more optometrists, which are doing treatment to relieve dry eye. We're working on the study for the FDA to get clearance.

And therefore, right now, we don't market it under dry eye treatment, but rather on what we have the clearance. And this is increased blood circulation and build some collagen, which we know that also help for dry eye. The team is 30 salespeople and a manager. The manager is a director level. He reports to the President of North America. It's part of the North American team. It's not totally separate company. It's not even a division. And they cover the entire U.S. They are not territory based. They cover the entire U.S. and also supporting sales of Envision in Canada.

This is the first time that we separate the product and the first quarter that we have a special team selling one product from our portfolio. We hope that this model will be successful because if -- yes, we might do it on other products as well in the future. But I believe it's very early to judge. It's only 3 months. So far, it seems like there are -- it seems like that the concept is working. And although to be responsible for the entire U.S. and Canada with 30 people, it's a little bit big territory, but we did it. And we'll see. Let's see the results throughout the year, and then we'll decide if that's successful or not.

That's great. And just a question on -- and again, I'll make the same apology if you'd covered this. The plans to repurchase shares, use of cash. You've done a good job of putting that cash back to work, giving back to shareholders as volumes were slowing and the market was kind of troughing here. How does that strategy play out this year? How are you thinking about capital allocation at this point?

So this is Yair. We started -- as you know, we announced a buyback plan earlier this year, and we started executing on that. So far, we purchased over $3.8 million under that plan.

8 million shares.

And 8 million shares, sorry -- 3.8 million shares under the plan, and we continue to -- we plan to continue to execute on the plan. Other than that, Moshe, do you want to elaborate about capital allocations? I think all the options are on the table.

Well, we always say the same thing, all the options on the table. We will -- we are allowed to do 10% of the outstanding shares every year without paying dividend tax, and we're doing it year-over-year. So far, I would say once we completed this 6.5 million shares, I believe it's another 2.5 million that we have to buy. We already did that 6 years, 6x, and we returned $600 million to the shareholders.

If you ask me if that helped the share price, so far not. And therefore, it's always a question mark, whether to continue or not to return capital to the shareholders with this type of operation only by buyback. Hopefully, now when the company continue to be a public company, I'm sure everybody knows that the last year, 2025 was a very tough year for InMode because of the failed project that tried to sell the company without success. And we remain public.

I believe it's important also to the team and to the people who felt unsecured during a very long time. And now maybe we will consider other ways to allocate capital to the shareholders; M&A, dividends and others. Everything is on the table and everything is open.

The next question comes from Sam Eiber with BTIG.

Yair, I just want to say thank you for all the access over the years. It was really nice getting to work together. Hopping between a few calls this morning, so apologies if this question already got asked. But maybe just following back up on capital allocation and maybe diving a bit deeper in terms of appetite for M&A. I know it's something that you guys have always been considering, but haven't seen any kind of deals over the last several years. I guess is that something that considering where markets are at this moment, willing to reevaluate? Or is it really more focused on still buybacks here?

Well, I cannot say more than what I did. Yes, M&A opportunities are being explored. We have nothing that are in any stage, but we're always checking because we believe that we did a lot of buyback. And if we have a candidate or a company to acquire in order to synergize either on the product level or the technology level or the customer level, we will explore. The only problem is right now, private company prices are very high and unfortunately, we were unable to acquire. We did 2 attempts, as you know, to buy an injectable company and to buy a toxin company, but we gave price which was probably not the best for this company's shareholders. Therefore, it was not accepted, but we will continue to try.

The next question comes from Michael Toomey with Jefferies.

This is Michael Toomey jumping on for Matt at Jefferies. I just had a question on what you're seeing on the broader aesthetics market, not just the energy-based side, but you mentioned the interest in injectables, but how is the broader aesthetic market growing today? And any difference there between broad aesthetics injectables and kind of energy-based devices?

Well, I believe that there are a few injectable companies which are public companies. And if you look at them, you will realize that in the last -- in 2025, they didn't do that good, but they see some sign of momentum in 2026. One thing I want to say, I mean, the energy-based device companies are competing on the same marginal dollar that people has for aesthetic. And on the other side, other than energy-based devices, GLP-1 took a lot of money from this industry, a lot of money.

And all the new product, boosters, biosimulator, exosomes are also competing very toughly with energy-based devices, and some of them are doing very well. Now that means that in the future, and that's what we thought when we gave an offer to injectable companies, energy-based devices will need either strategically cooperation or M&A or mergers with other type of aesthetic solution in order to be a one-stop shop.

As of now, we know that several companies like Alma signed a distribution agreement with fillers. I know that there was another Spanish company, Sinclair that actually closed all the EBD operation and stayed only with the injectables. But I didn't see yet a major company that actually offer both energy-based device treatment and all the other, I would say, injectables, exosome, biosimulator and other stuff that also compete on the same dollar on -- which are the same -- what I call aesthetic dollar.

And the reason for that, the main reason for that is that it's 2 different operations. You don't have an engineer that knows how to develop EBD or a pharma product, and you don't have a salesman who knows how to sell energy-based device for $100,000 and at the same time, to sell fillers or toxin for $100. Should need to be 2 separate operations. And in the future, I do believe that it will come.

Okay. That's great. And just a follow-up as well. With the gross margin new guides, anything you can comment on the phasing through the year?

On the what, phasing? Phasing throughout the quarter.

For the gross margin?

We believe it will stay the same, like 74%, 75%.

This concludes our question-and-answer session. I would like to turn the conference back over to Moshe Mizrahy, InMode's CEO, for any closing remarks.

Okay. Thank you, everybody. Thank you for being with us today. Before I close the call, I want to thank to our Chairman, Dr. Michael Anghel, who worked with us for, I would say, 8 years as a Director and as a Chairman. We enjoyed him very much. He is leaving, and I want to wish him success in the future. He was very helpful and very -- he contributed a lot to InMode.

And the second guy that I want to thank personally and on behalf of the company is Yair Malca, our Chief Financial Officer for 9 years now, even before the IPO, correct, isn't it? Even before the IPO, we hired him. He did a great job taking this company into an IPO and then maintaining everything that we need to do as a public company with all the reporting, talking with investors, talking with analysts.

So thank you, Yair, for everything you did for us and all the contributions that you brought to this company. And I wish you success in your new career.

Thank you very much.

Hopefully, the war in Israel will end and everybody will go back to a normal life, including us, and we will continue to do our best.

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

All right. Thanks, everybody, for joining us this afternoon. Very pleased to have with us Yair Malca, CFO at InMode.

So I think the topic for some time has been sort of, as I kind of make this shape with my hand of a down cycle and then the flat part of the cycle and then waiting for this up cycle. That's probably been something we've talked about a bunch over the last 2 years or 3 years. But maybe just to start off, I don't want to make too much of it. I don't want to get too overoptimistic, but it sounded like there were some signs of some improvement. This was, of course, before the events of last week, but it seemed like some hints that things might be starting to recover a touch in some of your end markets. So I hope I'm adding enough caveats and calibrating my enthusiasm enough. But tell me your thoughts on how you're looking at the market now and the cycle that you're in.

Sure. First of all, thanks for having us. It's always a pleasure to come here to Miami to be with you guys. Great conference. In terms of what we see and our message is that after 2 years of declining business that we've experienced, we expect 2026 to be flat. And hopefully, things will only get better from here. And that's basically what we have guided to, at least flat on the top line. We are expecting some kind of pressures on margins. We can touch on it later. But at least on the top line, we expect the decline to start. Overall, there still will be probably some areas and some pockets where we will see some decline and some growth that we see in other areas of the world.

But overall, we would like to see a flat year, and we are putting the -- and building the foundation, especially in North America to prepare this organization for the recovery and the return of the demand. Overall, we still believe that demand for aesthetic procedures is not going to go away. People would want to come back and get aesthetic treatment. Yes, there was some decline in the last couple of years all across the board, not only with energy-based device procedures, also with injectables such as toxins and fillers, et cetera. But we believe that at some point, the demand will come back, and we can touch about the macro and the high interest rates and everything. But at the end of the day, our basic assumption is that demand is not going to go away.

And we started restructuring the U.S. team. We have a new President. We appointed at the beginning of Q4, a new President and 2 new VPs, basically a new set of presidential suite in North America for us after having Moshe, our CEO, also carried the load as the President of North America for quite some time. I think that's a great step in the right direction. We have a dedicated new President of Sales for North America. We definitely see the excitement within the team. We put together a structure. I think we basically gave them almost all the resources they asked for, and now they need to start to deliver.

In addition, one more things that we did this year is effective at the beginning of the year, we bifurcated a certain portion of the sales team to have them focus on nonaesthetic, what we call sometimes call wellness devices and business. So we have a team that exclusively sell the eye care product and nonexclusive also sell some of the women's health and male health products as well in the U.S. And again, that's part of what I was talking about putting together the new foundations for North America and that we will be able to grow upon when things start to recover.

Got it. Right. And I think we have also been talking about that as a strategy a couple of years ago. And I think maybe some of the conversations were that's what we're doing, but the market where it is, it's like -- we don't have to really -- we're not rushing out to do this. We want to get the right people. The fact that you're making those changes now, I mean, from our standpoint, is a sign of confidence in what you were describing before, like some stabilization. So preparing for improving growth and putting the right people in place to manage that.

Exactly. We believe that now we have the right people in place to allow us to move forward with executing this plan.

Great. And then just you mentioned financing and the rates, those had been coming down since the upward rate cycle that triggered some of the initial challenges on the system sales side. But that's also not -- I mean, our understanding is that's not the sort of like the big variable in the equation right now. It would be nice if rates continue to go down, but really, it's sparking that end market demand and getting that going up again.

Correct. In terms of headwinds that we see, obviously, softening demand by the patients is more significant in terms of headwinds than the high interest rate, but obviously, high interest rate because we are focused on selling capital equipment as a business that impact our business as well.

Got it. So a couple of elements of the strategy. One is going after nonaesthetic, and that's always been part of the view to get into extra sort of like verticals and call points and Envision is an example, urogyn and ophthalmology are examples. Maybe talk a bit about where things are. I'd run into some folks at a couple of eye care-related meetings from InMode and obviously, great to see in action. But maybe talk about what have you accomplished so far? Anything you're able to share in terms of like how do we measure that or how can we see that? But then also what some of the catalysts are to sort of kick that growth up and adoption further?

Absolutely. Yes. So as you mentioned, we are expanded outside of the traditional aesthetic into those new segments. We started with women's health, then we moved to ophthalmology, optometrists. And then the next one would be probably ENT sometime next year.

As you mentioned, the ophthalmology team that we have, we have the indication for treating dry eye only in Canada. We are in the process and doing the studies that we need to in order to get a similar indication in the U.S. I think once we get this indication in the U.S., it will be easier for our sales team to sell. So we will see some uptick in sales once we get the indication, hopefully, later this year or probably next year, I think it's a more reasonable time frame. Until then, they are able to somewhat sell, but they are limited.

And once we get the full indication and full clearance for dry eye, we will be able, I think, to expand more into this space. Same with women health. We are working on some interesting clinical studies around some women health procedures. I think once we get those, this might take a little bit more time, but this is a big market. It's actually even a bigger market than ophthalmology or optometrist. What we've seen in ophthalmology and optometrists in Canada, where we do have the indication make us actually think positive, very positive. We have a lot of confidence about this space.

In Canada, we see that dry eye is mainly being treated by optometrists rather than ophthalmologists. And we need to see what -- we are still trying to figure out what's going to be -- how things are going to look like here in the U.S. It also depends on the state. Some states optometrists can treat the dry eye, some states only ophthalmologist. So we need to see how that plays out when we get the indication.

Okay. And platform known for Morpheus and skin tightening and less for laser, but laser has been something that you added to the portfolio recently. Maybe talk a little bit about that decision and then where the uptake has been, what the advantages are of bringing that into the mix.

Yes, you're correct. So in the last couple of years, starting actually mainly last year, we start offering more lasers. What we have seen in the market is this trend that providers offer combination treatments to their patients. And what it means is that when the patients come to the doctor, oftentimes they offer them Morpheus8 procedures together with a laser procedure.

So the Morpheus8, they treat deep into the skin and maybe sometimes it's needed all the way to the fat layer. And with laser, they treat superficially the skin and do some sort of resurfacing. And that's what creates some sort of a 3D effect. That's how they used to present it to the patients when you have -- you are treating both the deeper layer of the skin and then the superficial layers of the skin.

And we've seen a lot of customers -- the competitors calling on our customers and try to sell them lasers to all the Morpheus8 customers. And we realized that laser is pretty much a commodity nowadays, and we should be able to sell it ourselves. We would like to become a one-stop shop for our customers where they don't need to go to other competitors in order to get their energy-based device needs.

And I think that's the direction. We started with the CO2 laser last year. We introduced about a month ago, the pico laser here in the U.S. And later on the year, we'll introduce our own Erbium laser. So this is part of our direction right now. We are still -- most of our revenue is still coming from radio-frequency-based procedures and devices, but we wanted to add these lasers. So as I mentioned, we would like to be a one-stop shop for our customers and keep the competition out of our [indiscernible]. The price that we paid for that is on the margin. We get a hit on the margins because of that because laser is a commodity and it's fairly expensive energy to work with and ASPs because of the competitive nature of the market is not significantly high. We see some pressure on the margins, unfortunately, but that's part of the cost that we need to pay in order to be a dominant player all across the market.

Yes. And that's on the gross margin and the operating margin or just...

It's mainly on the gross margin.

Mainly on the gross. So cash contribution or contribution margin to the operating line because your rep is there, because you're in the account is still a positive for -- I mean, obviously, it would be better to be selling more skin tightening...

Yes. It's always more profitable for us to sell radio-frequency-based devices than laser. But again, there is a market for laser, and we want to take over this market as well.

Right. And then any cost benefits of some of the laser products you're planning on launching in terms of -- it's never going to be as profitable as RF...

We try to combine it with some of our actual bundle deals. For us, it's a very lucrative deal to do. So in those cases where we can, at the same transaction, bundle an RF device together with a laser device, that's usually what we want to see. And that's kind of where it makes sense for us the most.

So not a new segment just from a standing start, but an adjacency that's tied into, which makes sense. And I know business generates a fair amount of cash. I mean I'll just say that there's not many companies of your size that we've seen buy back as much shares as you have in the last 2 or 3 years. But one of the struggles and pressure that you've gotten from folks, investors and analysts is like going back even like 3 or 4 years is like why not do a deal? What can you add? And the challenge has been what are we going to find that doesn't start to drag down our P&L. And so this has been, I think, a positive. Any other opportunities? Or do we -- should we expect to see more opportunities on the business development front that sort of expand the bag and maybe capture more adjacencies even though they may be plus or -- hard to beat the 80-plus percent margin?

Yes. In terms of margin, you're absolutely right. Our margins are relatively very high. It's hard to find something that's getting close to what we do. But it's not only about the margins. It's also about market expansion. And we continue to look at all the alternatives. We continue to consider -- our Board continue to consider additional buybacks, maybe even dividend and, of course, M&A. What M&A can help us is either expansion into those new areas where we entered the women's health, ophthalmology, ENT, et cetera, or in the existing business. And it doesn't have to be a traditional M&A. It can be some kind of distribution agreement that we might sign, exclusive distribution agreement with some products that we believe might be beneficial for us to add to our portfolio, at least as a first step. And if we see that it makes sense later on, we definitely have the ability to buy them if we think that's the right move for us. So we keep all the options open, and we'll see what happens.

Okay. One of the things about the business that I remember the first couple of times we talked about it, it was sort of like, well, it's capital, but then when does the recurring revenue kind of overtake the capital because that's the classic kind of med tech robot-like business model. And you have to explain to me several times and I think other ask like that's not really what we're doing. We want to create a business model for a clinic that purchases the device to run a more profitable consumer-facing business essentially by keeping the consumable costs like under control.

I'm thinking of Envision, there's been some, call it, med device Envision folks pursuing dry eye. And I think some of them, no disrespect, of course, because some have been quite successful, but they are kind of taking that like consumable. Yes, like we're going to charge you, but then our business, really, we make our money off the consumables, whereas yours does not have a consumable and sort of how that -- how the response in that channel has been to a more profitable commercial opportunity they can offer their patients.

So you're absolutely right. In the aesthetic space where we know the space very well, we decided that we don't want to implement a razor and razorblade model in this space. And I think that was a big part of our success so far. Expanding into those new areas, at the moment, we still keep the same model of no razor and razorblade. However, in the future, we might consider other things. We are new to the space. We are still trying to build relationship, learn who's the different players, what are the most successful business models in the space. And if we see that we need to make changes, we will. At this particular moment, we still keep the same model we have in aesthetic that work for us very well in aesthetic and see if it's going to work there, too.

Okay. So on the -- back to margins for a second, you had been taking down as the market slowed, declining revenues year-over-year, but declining margins because you're sort of holding on to the commercial organization, staying in place and ready for the turn. Maybe talk about what happens not to get ahead of ourselves here, but when this goes from flat to 2% to 4% to 7% growth or some sort of recovery to sort of more historically standard aesthetics volumes. What does that look like on the margin front?

Okay. Great question. It also depends a lot on the mix, okay? And one of the reasons for the decline that we've experienced was the mix because most of the decline came from North America and from the U.S., where it is -- it used to be and still is the most profitable region that we have by far in terms of the margins, right? So it depends also where this growth, 2%, 3%, 4%, 7% as you're talking about is coming from. If it will come from the U.S., so yes, we should expect to see some improvement in margins. If it comes from international or from consumables, maybe less so much. So we need to see.

But again, we do believe that with us putting together this new structure and new foundations in the U.S., hopefully, in future years, the U.S. will return to growth. If it will be flat this year, that will be great and then start coming back to growth in future years, 2027 and on. I think that would definitely help with improving some of the margins. We are also following very closely what's going on with the tariffs. If they are going to go away for good, maybe we can see also some improvement on the margins as well. So yes, I don't want to commit to anything, but if we play the cards right and the U.S. continue to grow and the tariffs will go away for good, maybe we might see in the future some improvement -- slight improvement on the margin.

Right. And just to again, kind of set the right cadence, you might first see an improvement in consumables. You might first -- we all might be hearing about improving volumes to our colleagues that cover spec pharma and aesthetic consumables, we might start hearing about more volumes, but it's really a period of time of seeing that, that would then lead to systems and console purchase, which then really is where the inflection and leverage comes for InMode. Is that fair?

Yes. Accurate.

So you've also launched a number of new products during this period of time. So as things were difficult in the end markets, you were next-genning some of your products, launching some new products in addition to the laser and the consoles in ophthalmology and Empower. What sorts of things can you tell us? I know you don't want to get too far ahead of your new products, but what sorts of cadence of new products that we think about this year?

So this year, we started with the Pico. In Q1, last month, we launched the Pico. We start selling that as we speak. In the last week or 2, we start selling those in the U.S. and start delivering -- start taking orders and we start delivering in the next week or 2. So we started with that. That's -- again, it's not a new technology. Pico laser has been around. It's used mainly for tattoo removals and skin treatment. I actually did the pico laser myself on my face. I had a skin treatment. I was really impressed. So we're starting with that. And later on in the year, we will bring probably a new version of the Morpheus8 together with Erbium laser that I mentioned on the same -- both of them on the same console. But that will be towards the end of the year. So I don't count on too much contribution from that product.

Okay. And no other -- you're kind of where you need -- and then the other is '27 is a reasonable timeframe for potential approval of on-label dry eye and then no other real console additions. I mean, besides -- I'm talking about on the RF side.

No, those two. The Morpheus8 is RF, it will come at the end of the year. Morpheus8 together with -- so we'll have a console that can do radio frequency, Morpheus8, together with laser on the same console.

Got you. Okay. That's helpful.

So usually, we try to stay within two platforms every year, and this is where we are.

Awesome. All right. Well, I don't know if it's the Pico laser or the Southern California climate, but you look great. And it's nice to have you here again this year. So thanks.

Thank you. Great being here.

Good morning, and welcome to InMode's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions]

Please note this event is being recorded. I would now like to turn the conference over to Miri Segal, CEO of MS-IR. Please go ahead.

Thank you, operator, and everyone, for joining us today. Welcome to InMode's conference 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 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 turn the call over to Moshe Mizrahy, InMode's CEO. Moshe, please go ahead.

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; and Rafael Lickerman, our VP of Finance. Following our prepared remarks, we will be able to -- we will be available to answer your questions.

The fourth quarter was slightly better than expected, even as our industry continued to face ongoing challenges driven by higher interest rates and softer customer demand in the aesthetic space. Despite this headwind, InMode continued to benefit from its strong position and from the proven long-lasting clinical outcome patients experience when using our technology and platforms. These strengths continue to position us as the leader in the market of minimally invasive aesthetic treatment, reflected in both superior patient outcome and financial performance that remain among the best in the industry.

While local -- while total revenue declined approximately 6% year-over-year, revenue from consumables and services increased slightly compared to last year. We believe this may represent early sign of stabilization in patient activity and usage level across our installed base. We view 2026 as stabilization year for the business following a prolonged period of industry softness.

In 2025, we took decisive steps in our North American business. We appointed Michael Dennison as President of North America in October, and unified our operation into a single organization spanning from Eastern U.S., Western U.S. and Canada. Given the timing of this leadership change, the impact on fourth quarter results was limited. However, we expect the new structure, leadership and commercial initiative to begin delivering tangible results in 2026.

During 2025, we also laid the foundation for more differentiated and focused commercial organization. Our sales force is now segmented across aesthetic and wellness with dedicated team aligned to specific platforms.

For Envision, we have established a specialized sales team with a deep experience in the category, which we believe will drive increased penetration and improve sales productivity.

Product innovation remain a key pillar in our strategy. In 2025, we launched our CO2 laser platforms, which is performing well and expand our portfolio. By enabling combined treatment, it further reinforce our position as a one-stop solution across core procedures.

Looking ahead into 2026, we plan to keep innovating and introduce 2 new platforms, a Korean-made pico laser device and a device that combine the new Morpheus technology with Erbium:YAG laser. These upcoming launches are an important component of our long-term strategy.

We are committed to innovation. And as part of our strategy, we launched 2 new platforms of all technologies per year. We see meaningful interest across our existing customer base and the new ones, and we believe this product will improve our overall value proposition.

From a product mix perspective, most of our offering include Morpheus8 or minimally invasive component. This reflects the depth of our portfolio and the comprehensive nature of the solution we provide.

From a financial standpoint, we currently expect total revenue in 2026 to be broadly in line with 2025, and we anticipate continued evolution in our product mix. More broadly, the industry has not yet fully recovered from the global economic slowdown.

Demand in North America remained below historical levels. At the same time, we are encouraged by early sign of stabilization in the U.S. and gradual improvement in Europe, which we believe could improve incremental support to our performance going forward.

Overall, we are focused on disciplined execution of our product road map, continued refinement of our sales team and maintaining our leadership improved innovative position in the aesthetic industry.

Now I would like to turn the call over to Yair, our Chief Financial Officer. Yair?

Thanks, Moshe, and hello, everyone. Thank you for joining us. Before I begin to review our financial results, it is important to note that when comparing our year-over-year performance, the fourth quarter of 2024 included a onetime tax benefit. Therefore, we believe non-GAAP net income offers the most meaningful basis for comparing year-over-year results.

Starting with total revenues, InMode generated $103.9 million in the fourth quarter of 2025, up from $97.9 million in the same quarter last year. For full year 2025, revenue totaled $370.5 million, a 6% decrease compared to 2024.

Moving to our international operations. The fourth quarter was a record revenue quarter for Europe, reflecting continued momentum across the region. Sales outside the U.S. totaled $48.5 million in Q4, representing 47% of total sales and an increase of 38% compared to Q4 of last year, driven primarily by Europe. For the full year 2025, sales outside the U.S. accounted for $171.8 million or 46% of total sales, representing a 15% increase compared to 2024.

Gross margins in the fourth quarter of 2025 was 78% on a GAAP basis compared to 79% in the fourth quarter of 2024. Non-GAAP gross margins were 79% for both the fourth quarter and the full year of 2025.

In Q4 and in full year of 2025, our minimally invasive technology platforms accounted for 76% and 78%, respectively, of total revenues. For the full year of 2025, consumables and service accounted for 22% of revenue, an increase from 20% in 2024. To support our operations and growth, we currently have a sales team of more than 285 direct reps and 73 distributors worldwide.

GAAP operating expenses in the fourth quarter were $55.3 million and $205.6 million for the full year, an 11% and 0.5% increase year-over-year, respectively. Sales and marketing expenses increased slightly to $48.4 million in the fourth quarter compared to $44.7 million in the same period last year. Sales and marketing expenses for the full year of 2025 were $180.6 million compared to $181.4 million for 2024. The year-over-year decrease was primarily driven by lower sales commissions resulting from reduced sales as well as lower share-based compensation, partially offset by higher salaries and employee-related expenses.

Next, we look at share-based compensation, which decreased to $2.5 million in the fourth quarter of 2025 and $11.1 million for the full year of 2025. On a non-GAAP basis, operating expenses were $53.2 million in the fourth quarter compared to a total of $46.8 million in the same quarter of 2024, representing a 13.5% increase.

For 2025, non-GAAP operating expenses were $195.8 million compared to $189.8 million in 2024. GAAP operating margin for Q4 and for 2025 was 25% and 23%, respectively. Non-GAAP operating margin for the fourth quarter of 2025 was 27% compared to 32% for the fourth quarter of 2024. Non-GAAP operating margin for 2025 was 26% compared to 33% in the full year of 2024. This decrease was primarily attributable to higher sales and marketing expenses.

GAAP diluted earnings per share for the fourth quarter were $0.42 compared to $1.14 per diluted share in Q4 of 2024, and $1.43 in 2025 compared to $2.25 in 2024. Non-GAAP diluted earnings per share for this quarter were $0.46 compared to $0.42 per diluted share in the fourth quarter of 2024 and $1.60 for 2025 compared to $1.76 for 2024.

As of December 31, 2025, the company had cash and cash equivalents, marketable securities and deposits of $555.3 million, and we returned $127.4 million back to the shareholders through a disciplined share repurchase program. This quarter, InMode generated $22.7 million from operating activities.

Before I turn the call back to Moshe, I'd like to reiterate our guidance for 2026. Revenues between $365 million to $375 million, non-GAAP gross margin between 75% and 77%, non-GAAP income from operations between $87 million and $92 million, non-GAAP earnings per diluted share between $1.43 to $1.48.

I will now turn over the call back to Moshe.

Thank you, Yair. Operator, we're ready for Q&A session.

The first question comes from Matt Miksic with Barclays.

I appreciate all the color. So one on one of the comments that you made just now, and then I have one follow-up, if I may. You talked a little bit about encouraging signs of improving trends. I don't want to make too much of that. This is something we've talked about and anticipated for some time now. So what, if anything, are you seeing that would suggest things are starting to perk up a little bit? And then as I mentioned, I have one quick follow-up.

Well, thank you. We see, first of all, the interest rates started to come down. That's a good sign for us. And that means that the interest rate for leasing packages for 5 years, which is the main vehicle for the doctor to purchase capital equipment will probably will come down as well. And we see some decline in the interest rate on lease packages as well.

Second, I believe I said that in the fourth quarter of 2025, we see slightly increase in the procedures number. We see more sales in consumable, which represent, I mean, the numbers of minimally invasive treatment. So between these 2 and the slightly increase in revenue in Europe, we believe that these are very early signs. I'm not saying that we see the light at the end of the tunnel yet, but we see very, very, I would say, soft, some sign that will encourage us that maybe the momentum or maybe the change is coming soon.

Okay. That's super helpful. And then a follow-up. I'm not sure how much you're going to be willing to talk about it, as you probably already know what the question is. But just comments that were in the press about strategic alternatives. We view the stock as very attractively valued and has been for some time. Cash flows and margins stable, and being able to buy back shares and maneuver in a way that many companies your size can't just because of your margin structure, cash flows and tax benefits and so on.

What can you tell us about the process and maybe the timing as to when we might hear something as a result coming out of it?

Well, you know that in the last 2.5 years, we actually implemented a buyback program, which -- and we bought back stock for almost $508 million. Following that, the Board of Directors decided to look for some other strategic alternative to improve the value of the company, which we believe and the Board of Directors believe that it's still very low. So they are considering several type of strategic alternatives. They hire a bank in order to help them. I can say the name, Bank of America. And the process is done between the Board of Directors and the bank. The management is not fully involved in this process.

I want to comment one thing about the news that Steel Partners released to the market in the press release that they are willing to buy 51% of the company for $18 per share. So I wonder why they sent this letter to me as the CEO and to the Board of Directors. We do not have 51% of the company to sell. So the only way to buy 51% of InMode is to do a tender offer, hire a bank, put some money in an escrow account and offer it to the public, not to the CEO. I don't have 51% to sell and give them.

But they didn't do it. They just sent a letter to me and to the Board of Directors. And later, 1 day after, they published it as a press release. Other than that, we have no contact with them whatsoever, not myself, not the Board. We did not talk to them. We did not discuss it with them. We don't know why they put the press release out. But everything is possible in the U.S.

The next question comes from Danielle Antalffy with UBS.

This is just a question on the gross margin and the EBIT margin guide. It did come in a little bit lower. I appreciate revenues also coming in a little bit lower. I mean what are the different levers you can pull there to drive a little bit more leverage? I guess also what I'm getting at is, how conservative is this guidance because you still have pretty good leverage even with revenue a little bit softer than what the Street was looking for? And then I have one follow-up.

Yair, do you want me to answer that?

No, I'll take it, Moshe. First of all, yes, learning from the past couple of years, we try to be as conservative as we can with our guidance. But to answer your specific question about the margins, Moshe mentioned in his script that we -- one of the new products that we plan to launch is a pico laser next year as well as Erbium laser. And lasers tend to have a lower gross margin as everyone in the industry knows very, very well. And we expect those 2 new lasers that we launched in 2026 to weigh in on our gross margins a little bit.

Let me add to what Yair said. There are 2 reasons why the gross margin is going down. One, exactly what Yair said. We are getting into the laser -- development of new laser system, Erbium:YAG, CO2, Q-switched, maybe in the future, pico. But in the meantime, we have decided that in order to have those products in our portfolio, we need to find a reliable source to buy it from and bring it under our InMode brand name to the market.

So the first product that we are buying and selling is CO2 product. We will develop another CO2 in the future, but it's a CO2 product that we buy from American company under their FDA clearance. We made it with some changes to comply with InMode requirement as far as software and other elements, and we brought it to the market in 2025.

In 2026, we intend to bring to the market 2 new products, which we are going to buy from a Korean company. This is the pico and the Q-switched lasers. Both platforms are very well known in the medical aesthetic. But once we buy them and we bring them to the U.S., the cost to us is much higher than our internal manufacturing cost. And we need to take it as COGS. So the effect on the gross margin plus the effect of the U.S. tariff, 15% from all imports from Israel will affect the gross margin to go in the neighborhood of 75%.

Okay. That's helpful. And then my next question was actually related to the laser launches. I mean how much do you think this opens up the market to you incrementally in 2026 and '27? I appreciate you've had products here before, but just sort of how big is the laser portion of this market? And how much does your TAM increase by launching new products?

Well, historically, the laser platform is the bread and butter of medical aesthetics, okay? We came to the market 10 years ago with a new innovation using RF energy and not just laser. And we did very well because laser cannot penetrate deep, and RF penetrate as deep as you want, especially if you are treating in a minimally invasive method and procedures. So it was a very new technology that we introduced to the market.

Right now, we believe that in order to grow into the next level of product, we have to have the bread and butter as well. And this is the laser product, CO2, diode, Erbium, pico, Q-switched, there are many of them. These are not new technologies because all of these technologies are well known in the medical aesthetic industry, I would say, for at least 25 years. But we are bringing the new generation of lasers and we come to the market, and we believe that the synergetic effect between our technology and the laser technology will create another competitive advantage.

But unfortunately, the laser market is very saturated and therefore, prices of laser equipment are relatively low compared to InMode product, compared to Ignite, compared to OptimasMAX, compared to Morpheus. And therefore, the margin on them are relatively low compared to us. They are not relatively low, period.

In addition to that, some of the product we are buying, we're acquiring from a Korean company or from American company. And therefore, we have to share the margin with them. And that also will affect the margin. But basically, margin, it's a laser for medical aesthetic company, long term, it's a must, it's not nice to have.

The next question comes from Matt Taylor with Jefferies.

This is Mike Sarcone on for Matt today. I guess maybe just to start, Yair, maybe can you help us on the quarterly phasing when we think about top line and margins through the year?

I think it's going to be very similar to 2025. As you see, the guidance is pretty much spot on with our actuals for 2025, and I expect the quarterly distribution to be the same.

Okay. Great. And then just on the 2 new launches for this year, can you talk about what you have baked into guide from a financial contribution standpoint?

Well...

So I think the -- go ahead, Moshe.

I mean the 2 products that we launched this year in North America are the Solaria, which is the CO2; and the ApexRF, which is for blood -- increased blood circulation and some doctors using it for erectile dysfunction. These 2 product contribution in 2025 was -- it's about, I would say, $15 million.

Okay. And just that's 1-5, $15 million?

1-5, yes.

Got it. And any color on kind of new product contributions for 2026? Or are you not providing that?

Well, the 2 new products that we'll bring in 2026, one of them is made by us, which is a combination platforms of new technology of Morpheus. We don't want to elaborate what kind of a new technology. But for us, Morpheus, it's technology, it's not a product. And we have some new ideas how to make it next generation of Morpheus, combined with Erbium:YAG. Erbium:YAG is a superficial treatment on the skin, 200 micron, 150 micron, something for texture. And the Morpheus go deeper. So basically, if you combine between these 2 modalities in one platform, you give the dermatologists or the aesthetic surgeon or the aesthetic doctor ability to combine between these 2 treatments to get much better results. That's one product.

The second product is a product that -- it's a pico laser. We buy from a Korean company, young and small Korean company that we identified and we signed some kind of agreement with them. So we are exclusively selling their product in the United States. Pico, it's a very short pulse of laser. So pico is used for all kind of pigmented lesion for tattoos, for melasma, and other skin indications that you're treating. These 2 products we believe will be well accepted, although we are not the first one with pico. But with the other platforms, it's unique, and we're the only one.

So I don't know. I cannot give you any estimations how much we'll sell from each one of them, but these are 2 products that we are launching, and we are launching with intensive marketing, I would say, activity.

The next question comes from Joseph Conway with Needham.

I guess maybe just a quick one. Obviously, we saw minimally invasive decline a little bit in 2025, while noninvasive more than doubled, so very strong growth there. I'm just wondering if you can basically add some color as whether this is mostly driven by the new product launches, the new lasers? Or is there any industry shift that went on in 2025 that preferred the noninvasive treatment over the minimally invasive? Is this med spas growing faster than derm or surgeon clinics? Or like I said earlier, is it mostly just new product launch related?

Well, I believe we said that before, but I will say it again. Typically, minimally invasive procedure cost much more than noninvasive. So if you want to do one Quantum treatment, it can cost you $4,000 to $7,000 per one treatment. When you want to do laser hair removal, you can buy a package of 6 treatment for $3,000. So it's a $500 per treatment.

So the basic procedures like hair removal, skin rejuvenation, these are relatively -- I don't want to say cheap, relatively low-priced treatment. And the high-cost treatment like Morpheus, like Quantum, like BodyTite are more expensive. And therefore, when you have only $2,000 for aesthetic a year, you first go to do hair removal and skin rejuvenation, and then you go to do skin or face reshaping.

The procedures in 2025, although it was -- the number of procedures in 2025, although it was slightly above 2024, but taking into consideration that we added another 4,500 systems in 2025 to the market, the numbers did not grow. So we still don't see a major change in the number of procedures that we're selling that we are -- yes, the numbers of disposable, which means the numbers of procedures that we are selling to the doctors.

Another thing I wanted to add, and this is something that I believe affect all the market, and that's the GLP-1. The GLP-1, 35 million Americans are using GLP-1. So if they want to lose fat instead of doing liposuction or BodyTite, they can lose fat with GLP-1. Long term, we believe it will help us because once you lose fat, you have loose skin, and you need to tie the skin. And then minimally invasive is the best way because laser hardly tie the skin.

Yes. Okay. That makes perfect sense. And then just one more. It looks like based off of your slides that the number of countries that InMode is operating in jumped by a considerable amount, I think, at least 10 by my math. Just wondering there, what countries did you guys enter in this quarter or 4Q? What was the split there? Are these more direct subsidiaries versus distributors? I know last call, you called out Argentina and Thailand as new direct subsidiaries. And then maybe if you could just expand on that a little bit more, talk about are you guys still continuing to emphasize the direct sales over the distributor sales? Is that going to be a mission in 2026, possibly to help the gross margin line? Yes, any color on all that would be great. Much appreciated.

Well, there's always the rule of 20-80. 20% of your customers buying 80% of -- making 80% of your revenue. So if we're adding more customers, these are relatively small because the big countries and the big market, we're covering anyway.

But for example, I'll give you an example. For example, a small country like Austria, we have a subsidiary in Germany. So we opened a base in Austria as well. So this is another market. Although we don't have a distributor, it's direct from Germany. The same Ireland and Scotland from the U.K., the same Belgium for France.

The 2 new subsidiaries that we established in 2025, Argentina and Thailand used to be distributors, but we were not very happy with these distributors. And this is the reason we thought it might be better if we open our own subsidiary because there is a potential in those countries. But when we add another countries in Africa that buy 2, 3 systems, yes, there is a distributor who sells some product, but that's not adding much to our top line. Our top line will be to increase productivity and to increase market share in the big market. And don't forget, 80% of our sales today are direct. That means that 13 subsidiaries are controlling 80% of our revenue, and all other distributors, only 20% of our revenue.

Did I answer your question?

Yes. Yes. Perfectly, much appreciated. That's helpful.

The next question comes from Caitlin Roberts with Canaccord.

Just to start off, what are you specifically seeing in Europe that's been so encouraging? And do you continue to expect international to be a higher mix of revenues in 2026 than it's been historically?

Well, I don't know if I can say that. Although adding 2 subsidiaries to the international, and making basis in some countries with our existing subsidiaries, as I said before, Austria, Belgium, Scotland, Ireland will increase our direct sales in those territories, and it might increase the total revenue from the international.

But we also invested a lot of money and a lot of effort to -- I don't want to say, reorganize, but to streamline the operation in North America. We are combining the East, West and Canada into 1 company. Instead of having 3 companies, we have now 1 company that's using the same product line and the same marketing under the same language. And we believe that, that will help the North American market as well. So to tell you whether or not the international will be higher than the North America, we're not in a position. We would like both of them to grow.

Understood. And how should we be thinking about R&D and sales and marketing spend this year?

What is the question? What we think about R&D?

R&D and sales and marketing spend this year, what levels in 2026 versus 2025?

Okay. On the R&D, although I don't think it needs to be measured as a percentage of revenue, and I said that several times before, we have an R&D team in Israel, which include electronic, software, mechanical, clinical, regulation. It's one team. The fact is that in 2026, we will increase the spending on -- not the spending, the investing on R&D because we are initiating 2 big clinical study for women's health, which are not just a simple laser, and that will cost money. Each one of them probably will be in the neighborhood of between $2 million to $4 million in 2024, and maybe a little bit -- in 2026, and maybe a little bit in 2027. So that will increase the total expenditure on R&D.

As far as marketing, when it's a little bit difficult to sell because of the softness of the market and you want to keep your market share, you have to spend more on marketing. B2B, B2C, social media, conferences, which we are now planning to be in many of them all over the world. And the fact that we're bringing new market -- new product to the market also required some more expenses or more investing, I want to call it this way, on marketing. So I mean, the percentage will be similar to 2025. We will not spend more, but we are more focused on specific spending and not general.

The next question comes from Sam Eiber with BTIG.

Maybe I'll have two, just and I'll ask them both upfront here. First, on capital allocation, would love an update on your priorities here in 2026. And if maybe any decisions are going to be held off until the end of this review process?

And then the second question, just any update on the clinical work for the dry eye indication and FDA approval time lines?

We are trying to get indication for the dry eye using bipolar RF, not IPL because we believe that the IPL technology can do something, but the best results, as far as we know and we did some studies, is from RF, bipolar RF. So we initiated the process with the FDA. We met with the FDA, and the FDA have requested to do several safety tests on animals, and we did that to show the safety.

We believe that sooner, we will get from the FDA approval for the protocol that we are suggesting, and we will do the study in the United States. This is not an easy study because there is no predicate. And therefore, it's not a regular 510(k). It's 510(k) de novo, and it takes more time. I would say that the study will last all over '26 and maybe the first quarter of '27. So sometime in the second quarter of 2027, I believe we'll have the final clearance from the FDA.

And on capital allocation?

Regarding capital allocation, the Board is evaluating all the capital allocation alternatives together with the strategic alternatives that were mentioned earlier on the call. As soon as we have some updates, obviously, we'll share.

The next question comes from Dane Reinhardt with Baird.

I think based on the slide deck that was posted, you had a really nice quarter here in system placements in the U.S. I think by our math, probably the first time that those actually grew year-over-year in over 2 years. But offsetting that, I mean, your systems revenue in the U.S. was still down double digits.

So just trying to maybe parse out between the year-over-year growth in system placements between the declines that we're still seeing in revenue. I mean how much of that maybe is -- -- is some of those are just new ones that you're selling? Some of those lower-priced lasers versus the RF devices? Or how much of that even might be discounting just in the current environment where demand is a bit more subdued?

The number of systems that we sold this year in North America, I continue to say North America because I want to include Canada. The number of platforms that we sold in 2025 was about 2,100, around 2,100 systems. It's about 200 systems below 2024. It's about 200 systems below 2024. But the market is tough. The competition is strong. And therefore, the average selling price of a platform in 2025 was down 9% compared to 2024. Between these two, this is the decrease in the numbers, in the revenue in the U.S. And we did our best.

I believe that in 2026, with what I said before, the encouraging sign, the lower interest rate and maybe some kind of better consumer feeling, maybe we will keep it. And therefore, we said that 2026 for us, it's not going to be a growth year. It's going to be a stabilization year. We said that twice in the press release and also in my speech.

We will be very happy if we will continue to sell $370 million, which with about $100 million EBITDA altogether worldwide. And therefore, it takes time to transition a company like InMode. We are not a small company. We have 660 people worldwide working, plus the manufacturing, which is another 200 people. And we really made a lot of strategic thinking going forward to 2026, and I believe we are ready.

Thanks, Moshe. And then the other question I had on the men's wellness Apex platform. I think you guys just introduced that in August at a user sales meeting. One, how is feedback from that platform going so far? And two, can you remind me, do you guys have a specialized sales force for that platform? Or is it something that you guys are planning on doing in the future?

Which platform can you repeat your question, which platform you're talking about?

The Apex men's wellness.

The Apex. No, we do not have a special team to sell Apex. We have a special team in 2026, starting January 1 to sell the Envision. For us, it's a pilot. We didn't want to go and cut the organization into pieces. So we decided that we will take one piece at a time. Envision, it's important, and we're going to invest in a clinical study. And therefore, Envision is the first product that we actually built a special team only in the United States now and also partially in Canada that will send Envision.

The Apex is being sold with the other product under -- with the same team under the same organization. Now we're not pushing the Apex very much because we do not have yet the indication from the FDA. We're working on it, and we don't want to cross the line. So that's the most I can tell you now.

Got it. And if I can squeeze one last one in there. Do you have the number of consumable units that you guys sold in the quarter?

I believe we do. How much we did roughly? Yes, overall, 228,000.

This concludes our question-and-answer session. I would like to turn the conference back over to Moshe Mizrahy, InMode's CEO, for any closing remarks.

Well, thank you, everybody. Thanks to all the analysts that are covering us. I want to thank all shareholders, and a special thanks to InMode employees worldwide. It was not -- it was a tough year, 2025 was not an easy year for all of us with major changes and major adjustments. And we hope to see you again in the first quarter. Thank you very much.

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

Good day, and welcome to InMode's Third Quarter 2025 Earnings Results Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Miri Segal, CEO of MS IR. Please go ahead.

Thank you, operator, and everyone, for joining us today. Before we begin, I would like to remind our listeners that certain information shared 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 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 turn the call over to Moshe Mizrahy, InMode's CEO. Moshe, please go ahead.

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; and Rafael Lickerman, our VP of Finance. Following our prepared remarks, we will all be available to answer your questions.

The third quarter progressed in line with our expectation, even as we navigated a complex economic environment. Our performance this quarter reflects the strength in our diversified portfolio and the disciplined execution of our strategy. We remain focused on expanding our presence in high-growth markets and position the company well into the future.

This quarter, we expanded our global footprint with opening a new subsidiary in Argentina, an important milestone, our regional growth strategy. Establishing a local presence in this key market will allow us to better serve customers through direct engagement and localized support.

We are now focused on obtaining final clinical clearances and expect to begin generating internal initial revenue by the end of 2025.

Following the earlier launch of our subsidiary in Thailand, we are actively building strong local team to drive sales, laying the groundwork for sustainable growth across both regions.

As we noted in our Q2 update, we conducted a soft launch of the men wellness platforms to introduce it to selected users and early adopters, so we can gather initial clinical feedback.

The full commercial rollout event took place during the third quarter and we expect the beginning of revenue contribution toward the end of the year.

Finally, I'm excited to share some important news about a key leadership addition to our team. We recently appointed Michael Dennison as our President of North America. Michael is an entrepreneur-driven and award-winning sales leader who has built an impressive career in the medical aesthetic device industry, holding nearly every sales role along the way with over close to decade at InMode.

Michael advanced from District Sales Manager to Vice President of Sales, helping to grow revenue nationally, expand market share and build a strong distribution network across North America.

Looking ahead, we recognize the challenges in the marketplace, but remain confident in our competitive advantages, including our strong financial position, diverse and innovative portfolio and trusted global brand. These strengths position us as the global leader in the minimally invasive aesthetic and wellness industry.

Now I would like to turn the call over to Yair, our Chief Financial Officer. Yair, please.

Thanks, Moshe, and hello, everyone. Thank you for joining us. I would like to review our Q3 2025 financial results in more detail.

InMode generated revenues of $93.2 million. As a reminder, when comparing year-over-year results, last year's quarterly revenue of $130.2 million included $31.9 million in preorder sales.

Even with the traditional Q3 seasonality, consumables and service revenues were $19.9 million, up 26% year-over-year. This growth in consumables was driven primarily by markets outside of the U.S.

Our minimally invasive platforms accounted for 75% of total revenues this quarter. Sales outside of the U.S. increased slightly to $40 million or 43% of overall sales, a 10% increase year-over-year. The United States was the largest geographical revenue contributor, reaching $53.2 million.

GAAP and non-GAAP gross margins in Q3 were 78%, down from 82% reported in Q3 2024. As expected, our third quarter gross margins were lower due to the anticipated impact of tariffs, which we had incorporated into our outlook.

As part of our global expansion, we currently have 284 direct sales reps and distributors coverage in more than 73 countries. Sales and marketing expenses decreased to $44.9 million from $51.9 million in the same period last year. The year-over-year decrease primarily reflects the reduction in sales between the 2 periods.

GAAP operating expenses in the third quarter were $51.4 million, an 11% year-over-year decrease. On a non-GAAP basis, operating expenses were $49.1 million this quarter, down from $54.4 million, a 10% decrease year-over-year. GAAP operating margin was 22%, down from 37% in the third quarter of 2024.

On a non-GAAP basis, operating margin reached 25% compared to 40% last year. GAAP net income was $21.8 million, down from $50.9 million in the third quarter of 2024. On a non-GAAP basis, net income was $24.5 million, down from $54.9 million.

GAAP diluted earnings per share for the third quarter were $0.34, down from $0.65 in Q3 of 2024. Non-GAAP diluted earnings per share was $0.38, down from $0.70 per diluted share in the third quarter of 2024. Share-based compensation declined to $2.7 million from $3.9 million in the third quarter of 2024.

We ended the quarter with a strong balance sheet. As of September 30, 2025, the company had cash and cash equivalents, marketable securities and deposits of $532.3 million. This quarter, InMode generated $24.5 million in cash from operating activities.

Before I turn the call back to Moshe, I would like to reiterate our guidance for 2025. Revenues to remain between $365 million to $375 million, non-GAAP gross margins to remain between 78% to 80%, non-GAAP income from operations to remain between $93 million and $98 million, non-GAAP earnings per diluted share to remain between $1.55 to $1.59.

I will now turn over the call back to Moshe.

Thank you, Yair. Thank you very much. Operator, we are ready for the Q&A session. Please.

[Operator Instructions] And your first question comes from Danielle Antalffy with UBS.

Congrats on a good quarter here. Just curious, Yair, as you look at the Q4, the implied Q4 guidance based on what you provided at the midpoint, you did beat Q3. So it implies a little bit of a lower Q4 number.

But I was wondering if you could level set us, sort of, as we think about the exit rate here in 2025 and look ahead to 2026, how we should be thinking about sales growth next year given the lingering uncertainties out there, I think consensus is sort of in the mid-single digit range?

I think it is a little bit too early for us to discuss guidance 2026. We would like to see how Q4 plays out before we discuss 2026.

I think we would want to be somewhat conservative when we go into next year because of all the uncertainties, as you have mentioned. That's all I can say about 2026 at the moment.

Okay. That's totally fair. I hear you. And then just the capital equipment environment, it looks like in Q3, international was weaker, U.S. not as weak.

But in the U.S. specifically, we are in an environment now where interest rates are coming down. I mean, does this make you a little bit more optimistic as we look ahead to 2026, appreciating you want a conservative starting off point, but just maybe comments on hearing from customers? Is there increased interest now to purchase capital equipment as interest rates come down?

So the interest rate has come down, but not enough to see that trickle in a meaningful way into the financing of the capital equipment in the U.S. as hopefully it will continue to come down, then we will start see a more meaningful impact. And then hopefully, this will translate to additional or increase in capital equipment sales.

And Moshe, go ahead.

No. What I wanted to say, it's not just in the United States. We don't see the end -- the light at the end of the tunnel as regard to financing capital equipment, especially medical equipment to clinics.

I'm not talking about hospital and hospital is probably different. But as far as clinics who are buying capital equipment like for medical aesthetic or any other medical community, I mean, the interest rate on leasing are still very high.

I know that the interest rate went down twice in the United States, 0.5%. In Europe has not yet. So we believe that sometime in 2026, when the U.S. will lead the reduction of interest rate, it will come up to other territories, but we don't see it yet.

[Operator Instructions] Your next question comes from Matt Miksic with Barclays.

I had one question on the ophthalmology initiative that you've been sort of pushing forward over the last couple of years. It ran into some of your folks at AO and the general sentiment around the conference and around those specialties is significant upswing in dry eye treatment and significant interest, particularly in the optometrist channel.

I'm just wondering any color or updates you have on your strategy there, the progress, contribution, if you want to go there? And then I had one quick follow-up.

Okay. Hi, this is Moshe. Well, let me answer your question on a couple -- 2 things. One, as regard to commercial and salespeople, we are separating the salespeople for the Envision from the rest of the aesthetic and starting 2026, it will be managed by a director who is responsible only for the Envision and the sales team will sell only to Envision to optometrists and also to ophthalmologists.

We are making some progress with the American Optometrists Association. We have some agreements with them to do together some workshop in different state. And we started that at the second quarter, we continue on the third quarter and we have at least 3 events coming on the fourth quarter.

In addition to that, as far as the ophthalmology, as you probably know, we still do not have the final clearance from the FDA to say that we're treating dry eye. We hopefully will -- we're still -- we negotiated with the FDA.

I don't want to call it negotiated. It was a discussion with the FDA as regard to the protocol that we will do during the study to get the indication. We are in the last stage.

We're doing some safety tests right now on [ Revit ]. Hopefully, they will approve it before the end of the year and we will start the study next year.

It's not going to be a very long study, because you need to show some immediate effect. Hopefully, sometime towards the second quarter of 2026, we will finalize the results of the study, submit the FDA. So sometime towards the second half of 2026, we will be able to clear the indication and claim dry eye.

But right now, not only in the United States, we have enough data that show the significant competitive advantage of any other modalities that deal with dry eye and we sell it without the clearance, just because we're explaining how it's worked.

We do have the FDA clearance to the handpiece, either the Lumecca, the IPL or the bipolar RF. The 2 handpieces are already approved. So we sell it without the clear indication, but we have enough clinical data to show to the doctors and to the optometrists, they are also doctors, but they are ODs, to show them the advantage.

And we are making progress. And hopefully, next year, once we have a distinguished and separated sales team, we will show better momentum.

That's very helpful. Just one, maybe zooming out to the broader business in aesthetics. Similar kind of question. When we all sort of, I think, have a sense of where you think the market is and waiting for sort of like this general sort of uptick or upswing in the cycle in the U.S.

But in terms of new products, anything that you would call out in addition to this initiative and follow-through in optometry and ophthalmology that could start to kind of drive incremental growth in, say, early first half of '26, back half of '26? Any color on the pipeline would be super helpful.

Well, we have some products coming to the -- we will launch early next year, mainly in the aesthetic, some new lasers that we bring to the market. I don't want just to reveal the type of lasers and what exactly these lasers do, but they are very complementary to our aesthetic, I would say, portfolio.

Two of them will be introduced during the national sales meeting in the U.S. sometime at the end of January '26. We will also present those 2 devices at IMCAS, which is the main conference in Europe, again, sometime in the beginning of February next year.

Yes, we currently have enough projects on the R&D pipeline, aesthetic and wellness and we will launch them 2 at a time.

[Operator Instructions] Your next question comes from [ Caitlin Roberts ] with Canaccord Genuity.

It's [ Michelle ] on for Caitlin. Can you maybe talk more about your rationale for picking Michael Dennison for the new role of President of North America and what he is working to drive in the early days in the new position?

Yes. Michael worked with us for more than 10 years. And before that, he used to work for Cynosure, which is another major company in medical aesthetics. He is relatively young, in the 40s. Basically, before he took the President position, he was Vice President for the East Coast of the U.S., doing very well.

I would say the reason why we nominated him is because we didn't have -- we didn't want to have the East and West in the U.S. We want to combine all the territories under one management. And we thought Michael is the right guy to do it for InMode. And therefore, right now, we are combining all the territories under one manager, including Canada -- including Canada.

And anything else that you want to know about him? I mean, he's well known. He knows the market, he knows the doctors. He knows everything about sales and marketing, many years of experience.

As part of his taking the position of President, 2 VPs left. One was the VP West, which wanted to be a President, but we had to select only one; and also, the VP of Canada, and we're not hiring another VP for the West and VP for Canada.

We rather have some sales director in every territory. We divide the U.S. into 6 territories and Canada is the seventh one and they all report to Michael at that point.

Next year, we might appoint some other position for strategic planning and other, but we want to keep the entire North America operation under one roof.

That's great. And maybe one more from us on urology. How did the user meeting in late August go on the urology side? And have you begun rolling out the products or seeing revenue contribution? And then any commentary or directionality you could give us for your expectations for the urology business in 2026?

Urology, I understand you mean the men wellness. Yes, I mean, the August event was a user meeting that we had in Chicago and it was with something like 800 doctors. And we introduced that with the 2 lectures and presenting some clinical data that we had at that time, which was good clinical results.

And now we are launching it and every aesthetic rep can sell this device as well. We are not separating yet. We want to see what will be the results until the end of the year and the beginning of 2026 and we'll make the decision later.

And your next question comes from Sam Eiber with BTIG.

It's [ Alex ] on for Sam. So I just had a quick question on the OUS business. And so you mentioned that you guys opened a new subsidiary in Argentina this quarter and also have been expanding your efforts in Thailand.

So can you just talk more about the strength in OUS this quarter? And how can we think about it moving forward?

You mean about the 2 subsidiaries that we opened this year?

And just OUS in general, like what are the trends there? Like how should we think about it, like for the end of the year and going into like '26? Like will it be more of the same or different?

Okay. If you're talking about OUS in general, currently, we have -- we're selling in 88 to 90 countries, out of which in Europe, we have 5 subsidiaries that cover 10 countries, Italy; Spain that cover Portugal as well; Germany cover Austria as well; France is covering Belgium as well; and U.K. is covering Ireland and Scotland. So these are all direct operations that we have in those countries, something like 10 countries.

In Asia, we have 4 countries: Australia, India, Japan and the new established Thailand. And we are currently not planning to -- in 2025, we are not planning to add more countries, not in Europe and not in Asia.

The only one country that we have direct right now in Latin America is Argentina. And the base we build in Argentina is also responsible to manage all the distributors in Latin America.

As far as managing the distributors in EMEA, Europe, Middle East and Africa, we have a base in London with the VP sitting there and he is responsible for all of this area.

In North America, you know we have Michael Dennison managing all the North American operations, Canada and the U.S.

And Israel is also a country where we are considering now going direct. We used to have 2 distributors, but we want to go direct starting 2026, because it's a home base and we want to sell direct here. It's important for us.

I don't know which country will develop in 2026 to become direct operation. We have not yet decided. We have several alternatives and we're exploring several opportunities, but we are just now focusing in the last 2 that we established in the last 6 months.

And your next question comes from Mike Matson with Needham.

This is [ Joseph ] on for Mike. I guess apologies if this was already asked, as I hopped on from a different call. But just looking at noninvasive growth, obviously, you guys had a really large quarter in the second quarter and dropped back down this quarter.

I'm just kind of wondering how should we think about the lumpiness of this division? Is it -- was there just large orders in the second quarter and it's more stabilized from here out? Yes. Any color there would be helpful.

You mean on the noninvasive and non-ablative. That's correct?

Yes.

Okay. Let me say something before. I would say that except 1 or 2 platforms that we sell, almost every platform that we sell has at least one invasive or ablative handpiece, either Morpheus body face or the Ignite or the BodyTite.

What we sell noninvasive, it's what we call the commodity type product like all the other competitors, diode laser, IPL, noninvasive RF, hands-free devices.

We don't have -- we have a competitive advantage in this field and we would like it to grow, because we want to be one-stop shop to every doctor. So if the doctor needs a complementary technology to our minimally invasive and ablative, we wanted to buy from us.

So this is -- and currently, we are developing some new lasers which are noninvasive. So this doesn't mean that we are now doing only things that are ablative and invasive. Everything is getting the same attention and we're developing the noninvasive as well.

I don't know if I answered your question, but I believe that...

I would like to add that this year, Joseph, we -- the 2 new products that we added happened to be noninvasive, the CO2 that we added in the beginning of the year and men health that we added after.

So this is the reason for the increase that you see in the noninvasive category for us.

I see. So just a lot of orders for customers that were waiting for those new platforms and a lot of that was realized in the second quarter. No, that's helpful.

And then maybe just one quick one, just touching on the consumables growth. I'm curious how many handpieces you guys sold in the quarter and just how you're thinking about growth there in procedures.

In the third quarter of 2025, we sold about 230,000 disposable, which means onetime use tips, either for minimally invasive or ablative.

Okay. Great. That's helpful. So it looks like a sequential increase in the quarter. Okay. Yes. That's all very helpful.

This concludes our question-and-answer session. I would like to turn the conference back over to Moshe Mizrahy, InMode's CEO, for any closing remarks.

Thank you, operator, and thank you, everybody, who attended this call. I want to thank the InMode team, especially in all the territories. And we hope that the fourth quarter, as always, will be the strongest one and we're looking forward to 2026. Thank you very much.

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