Good morning, and welcome to InMode Ltd.'s fourth quarter and full year 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please note this event is being recorded. I would now like to turn the conference over to Miri Segal-Scharia, CEO of MSIR. Please go ahead.

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

Thank you, Miri, and to everyone for joining us. With me today are Dr. Michael Crindel, our Co-Founder and Chief Technology Officer, Yair Malca, our Chief Financial Officer, and Rafael Liqueman, our VP Finance. Following our prepared remarks, we will be available to answer your question. 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 Ltd. continued to benefit from its strong position and from the proven, long-lasting clinical outcomes and patient 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 outcomes and financial performance that remain among the best in the industry. 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 signs of stabilization in patient activity and usage levels across our installed base. We view 2026 as a stabilization year for the business following a prolonged period of industry softness. In 2025, we took the 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 initiatives to begin delivering tangible results in 2026. During 2025, we also laid the foundation for a more differentiated and focused commercial organization. Our sales force is now segmented across aesthetic and wellness with a dedicated team aligned to specific platforms. For Envision, we…

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, 2024 included a one-time 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 Ltd. 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 2025 were 78% on a GAAP basis compared to 79% in 2024. Non-GAAP gross margins were 79% for both the fourth quarter and the full year of 2025. In Q4 and in full year 2025, our minimally invasive technology platforms accounted for 76% and 78%, respectively, of total revenues. For the full year 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 110.5% 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…

We will now begin the question-and-answer session. On your telephone keypad, please press star, then one to ask a question. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, press star, then two. The first question comes from Matt Miksic with Barclays. Please go ahead.

Hey, thanks so much for taking the questions, and 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 do not want to make too much of that. This is something we have talked about, and it has been 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. Thank you. We see, first of all, the interest rates started to come down. That is a good sign for us, and that means that the interest rate for leasing packages for five years, which is the main vehicle for the doctors to purchase capital equipment, will probably 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 2025, we see a slight increase in the procedures number. We see more sales in consumables, which represent the numbers of minimally invasive treatments. So between these two and the slightly increasing revenue in Europe, we believe that these are very early signs. I am not saying that we see the light at the end of the tunnel yet, but we see very, very, very, I would say, soft signs that encourage us that maybe the momentum or maybe the change is coming soon.

Okay. That is super helpful. And then follow-up, I am not sure how much you are going to be willing to talk about it. So you probably already know the question is, but just comments that were in the press about strategic alternatives. You know, we view the stock as very attractively valued and has been for some time. Cash flows and margins are stable and being able to buy back shares and maneuver in a way that many companies your size cannot, 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 two and a half years, we actually implemented a buyback program, and we bought back stock for almost $580 million. Following that, the Board of Directors decided to look for some other strategic alternatives to improve the value of the company, which we believe, and the Board of Directors believes, is still very low. So they are considering several types of strategic alternatives. They hired 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 on 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 Ltd. 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 do not have 51% to sell and give them. But they did not do it. They just sent a letter to me and to the Board of Directors and later, one 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 do not know why they put the press release out, but everything is possible in the U.S.

I suppose so. Thanks so much. The next question comes from Danielle Joy Antalffy with UBS. Please go ahead.

Hey, good morning, everyone. Thanks so much for taking the question. Yair, 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. What are the different levers you can pull there to drive a little bit more leverage? I guess, also, what I am 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 will take it, Moshe. First of all, 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 margin, Moshe mentioned in his script that one of the new products that we plan to launch is a Pico laser next year as well as the Erbium laser.

And lasers tend to have a lower gross margin.

As everyone in the industry knows very well. And we expect those two new lasers that we launch in 2026 to weigh in on our gross margins a little bit.

Let me add to what Yair said. The two reasons why the gross margin is going down: one, exactly what Yair said, we are getting into the laser development of new laser systems—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 InMode Ltd. brand name to the market. So the first product that we are buying and selling is a CO2 product. We will develop another CO2 in the future, but it is a CO2 product that we buy from an American company under their FDA clearance. We made it with some changes to comply with InMode Ltd. requirements 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 two new products which we are going to buy from a Korean company. This is the Pico and a Q-switched lasers. Both platforms are very well known in medical aesthetics. 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 is helpful. And then my next question was actually related to the laser launches. How much do you think this opens up the market to you incrementally in 2026 and 2027? I appreciate you have had products here before, but just how big is the laser portion of this market? And how much does your TAM increase by launching these products?

Well, you know, historically, the laser platforms are the bread and butter of medical aesthetics. We came to the market ten 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 penetrates as deep as you want if you are treating in a minimally invasive method and procedure. 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 products: 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 Ltd. products—compared to Ignite, compared to Optimus Max, compared to Morpheus. And therefore, the margins on them are relatively low compared to us. They are not relatively low, period. In addition to that, some of these products we are buying, we are acquiring from a Korean company or from an American company, and therefore, we have to share the margin with them. And that also will affect the margin. But basically, lasers for medical aesthetic companies long term, it is a must. It is not nice to have.

Got you. Thank you so much.

The next question comes from Matt Taylor with Jefferies. Please go ahead.

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

I think it is 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. Thank you. And then just on the two new launches for this year, can you talk about what you have baked into the guide from a financial contribution standpoint?

Well— So I think—go ahead, Mike. I mean, the two products that we launched this year in North America are the Solaria, which is the CO2, and the APX RF, which is for increased blood circulation, and some doctors are using it for erectile dysfunction. These two products' contribution in 2025 was 35 times 60. It is about, I would say, $15 million.

Okay. And that is $15 million?

$15 million, yes.

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

Well, the two new products that we will bring in 2026—one of them is made by us, which is a combination platform of new technology of Morpheus. We do not want to elaborate what kind of a new technology. But for us, Morpheus is a technology, it is not a product, and we have some new ideas how to make the 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 goes deeper. So basically, if you combine these two modalities in one platform, you give the dermatologists or the aesthetic surgeons or the aesthetic doctors the ability to combine these two treatments to get much better results. That is one product. The second product is a Pico laser we buy from a Korean company, a 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 is a very short pulse of laser. So Pico is used for all kinds of pigmented lesions, for tattoos, for melasma, and other skin indications that you are treating. These two products we believe will be well accepted, although we are not the first one with Pico. But with the other platform, it is unique, and we are the only one. So I do not know—I cannot give you any estimations how much we will sell from each one of them, but these are two products that we are launching, and we are launching with intensive marketing, I would say, activity.

Great. Thank you, Moshe and Yair.

The next question comes from Joseph Conway with Needham. Please go ahead.

Moshe, Yair, thank you very much for taking our questions. 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 am just wondering if you can add some color as to 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 treatments 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 procedures 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 six treatments for $3,000. So it is $500 per treatment. So the basic procedures like hair removal, skin rejuvenation—these are relatively, I do not want to say cheap, relatively low-price treatments. And the costly treatments 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 the numbers of procedures in 2025 were 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 do not see a major change in the number of procedures—the numbers of disposables, which means the numbers of procedures—that we are selling to the doctors.

Okay. And another thing I once read—

This is something that I believe affects all the market, and that is 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 tighten the skin, and then minimally invasive is the best way because laser hardly tightens 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 Ltd. is operating in jumped by a considerable amount, I think at least 10 by my math. Just wondering there what countries did you enter in this quarter—distributors—or like 4Q? What was the split there? Are these more direct subsidiaries? 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. Are you 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? Any color on all that would be great. Much appreciated.

Well, you know, there is always the rule of 20/80. Twenty percent of your customers are making 80% of your revenue. So if we are adding more customers, these are relatively small because the big countries and the big markets we are covering anyway. But for example, I will give you an 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 do not have a distributor, it is direct from Germany. The same with Ireland and Scotland from the U.K., the same Belgium for France. The two 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 other countries in Africa that buy two, three systems, yes, there was a distributor who sold some product, but that is not adding much to our top line. Our top line will be to increase productivity and to increase market share in the big markets. And do not 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. Okay. Did I answer your question?

Yes. Yes. Perfectly. Much appreciated, and that is helpful.

The next question comes from Caitlin Cronin with Canaccord Genuity. Please go ahead.

Hi, thanks so much for taking the questions. Just to start off, what are you specifically seeing in Europe that has been so encouraging? And do you continue to expect international to be a higher mix of revenues in 2026 than it has been historically?

Well, I do not know if I can say that. Although, adding two subsidiaries to the international and making bases 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 do not want to say reorganize—but to streamline the operation in North America. We are combining the East, West, and Canada into one company. Instead of having three companies, we have now one company that is using the same product line and the same marketing under the same language, and we believe that will help the North American market as well. So to tell you whether or not the international will be higher than North America, we are 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 do 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 do not 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 includes electronics, software, mechanical, clinical, and regulation—it is one team. The fact is that in 2026, we will increase the spending—not the spending, the investing—on R&D because we are initiating two big clinical studies for women's health, which are not just simple lasers, and that will cost money. Each one of them probably will be in the neighborhood of between $2 million to $4 million 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 is 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 are bringing new products to the market also requires some more expenses—or more investing, I want to call it this way—on marketing. So, I mean, the percentages will be similar to 2025. We will not spend more, but we are more focused on specific spending and not general.

Understood. Thanks so much.

The next question comes from Sam Shimon Eiber with BTIG. Please go ahead.

Hi, good morning. Thanks for taking the questions. Maybe I will 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. Then the second question, just any update on the clinical work for the dry eye indication and FDA approval timelines? Thanks.

We are trying to get indication for the 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 has 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 study that we are suggesting. We will do the study in the United States. This is not an easy study because there is no predicate, and therefore it is not a regular 510(k), it is 510(k) de novo. It takes more time. I would say that the study will last all over 2026 and maybe 2027. So sometime in 2027, I believe we will 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 we mentioned earlier on the call. As soon as we have some updates, obviously we will share.

Great. Thank you.

The next question comes from Dane Reinhardt with Baird. Please go ahead.

Hey, thanks, guys, for the questions here. 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 two years. But offsetting that, 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 and declines that we are still seeing in revenue. How much of that maybe is if some of those are just new ones that you are 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? Thanks.

The number of systems that we sold this year in North America—I am continuing to say North America because I want to include Canada—the number of platforms that we sold in 2025 was about 2,100 systems. It is about 100 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 revenue in the U.S. And we did our best. I believe that in 2026, with what I said before—the encouraging signs, the lower interest rates, and maybe some kind of better consumer feeling—maybe we will keep it. And therefore, we said that 2026 for us is not going to be a growth year. It is 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 with about $100 million EBITDA altogether worldwide. And therefore, it takes time to transition a company like InMode Ltd. We are not a small company. We have 660 people worldwide working, plus the manufacturing, which is another 200 people. And we have really made a lot of strategic thinking going forward to 2026, and I believe we are ready.

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 have a specialized sales force for that platform, or is that something that you are planning on doing in the future?

Which platform? Can you repeat your question? Which platform are you talking about?

The Apex Men's Wellness.

Ah, the Apex. No. We do not have a special team to sell APAX. We have a special team in 2026, starting January 1, to sell the Envision. For us, it is a pilot. We did not want to go and cut the organization into pieces. So we decided that we will take one piece at a time, and Envision is important, and we are going to invest in the clinical study, and therefore Envision is the first product that we actually built a special team for, only in the United States now and also partially in Canada, that will sell Envision. The APAX is being sold with the other products with the same team under the same organization. Now, we are not pushing the APAX very much because we do not have yet the indication from the FDA. We are working on it, and we do not want to cross the line. So that is 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 sold in the quarter?

I believe we do. Overall, 128,000.

Got it. Thank you very much. Appreciate the questions today.

This concludes our question-and-answer session. I would like to turn the conference back over to Moshe Mizrahy, InMode Ltd.'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 Ltd. employees worldwide. 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.