InMode Ltd. (INMD) Q1 2026 Earnings Report, Transcript and Summary

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.