Inmode Ltd

NASDAQ:INMD

Earnings Call Analysis

Mixed Q3 Results Amid Market Slowdown

Amidst a market slowdown and high interest rates impacting financing, the company experienced a seasonal dip in Q3, aligning with historical patterns where Q4 typically rebounds and is the strongest quarter. Despite challenges, the company maintains a gross margin of 84% and an operating margin expected around 44% for Q4. While some territories face impacts more significantly than others, the company still anticipates slight single-digit growth year-over-year. With $140 million in revenue needed to hit the above $500 million 2023 target, optimism remains to meet Q4 targets using inventory, territory alignment, and hiring rather than layoffs. Future guidance for 2024 is pending on Q4 outcomes.

Revenue Slight Increase Amidst Challenging Market Conditions

InMode reported a moderate increase in revenue for the third quarter of 2023, with figures reaching $123.1 million, a 2% rise compared to the same quarter of the previous year.

Return to Normalcy Boosts Performance

The company witnessed a return to the usual seasonal patterns among US and European patients and physicians, contributing to the financial outcomes of Q3.

Record Interest Rates Influence Sales Dynamics

Heightened interest rates slowed down the financing environment for leasing agreements, which in turn reduced the number of platforms sold in the United States.

Constant Demand for InMode's Treatments

Despite market challenges, the demand for InMode's treatments remained robust, underpinned by the company's focus on patented technologies and innovative solutions.

Commitment to Innovation and IP

InMode persists in its commitment to developing new technologies and upgrading existing platforms, while aggressively enhancing and protecting intellectual property.

Operational Resilience and Preparation

The firm maintains sufficient inventory levels and expects to deliver platforms and consumables on time without compromising quality. This is a testament to the company's operational resilience and proactive planning.

Rising Consumable Sales Indicate Steady Demand

Revenues from consumables and services made up 15% of total Q3 revenues, marking a 28% increase year-over-year, a sign of ongoing demand for InMode's offerings.

Product Launches to Propel Future Revenues

The successful Q3 release of the Envision platform and DEFINE, an improved hands-free technology, is anticipated to generate revenues in Q4.

International Sales Growth and Expansion

InMode continues to grow sales outside the U.S, now accounting for 36% of total revenue, while operating in 93 countries. This expansion demonstrates the company's increasing global footprint.

Sales and Marketing Investment Increase

Sales and marketing expenses rose to $50.8 million, attributed to the addition of new sales personnel and investments in consumer advertising campaigns.

Reduced Share-based Compensation Expenses

Share-based compensation expenses decreased to $6.6 million in comparison with the $7.9 million of last year's third quarter.

Operating Margin and Earnings Per Share Decline

GAAP operating margins fell to 38%, and GAAP diluted earnings per share were reported at $0.54, reflecting decreases from the previous year's 44% and $0.58, respectively. Meanwhile, non-GAAP diluted earnings per share were $0.61 compared to $0.66 per diluted share in the prior year.

Strong Balance Sheet and Financial Position

As of the end of Q3, InMode's financial position was robust with cash, marketable securities, and deposits totaling $675.8 million.

2023 Financial Guidance

The company expects revenues to be between $500 million and $510 million, with a non-GAAP gross margin between 83% and 85%. The guidance also includes non-GAAP income from operations between $220 million and $225 million, along with non-GAAP earnings per diluted share of between $2.53 and $2.57.

Earnings Call Transcript 2023-Q3

[Operator]

Good day, and welcome to the InMode's Third Quarter 2023 Earnings Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note, today's event is being recorded. I'd now like to turn the conference over to Miri Segal of MS-IR.

[Miri Segal-Scharia]

Thank you, operator and everyone, for joining us today. Welcome to InMode's Third Quarter 2023 Earnings Call. Before we begin, I would like to remind our listeners that certain information provided on this call may contain forward-looking statements and the safe harbor statement outlined in today's earnings release also pertains to this call. If you have not received a copy of the release, please 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 pass the call over to Moshe Mizrahy, Chairman and CEO. Moshe, please go ahead.

[Moshe Mizrahy, executive]

Thank you, Miri, and thanks 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; Shakil Lakhani, our President in North America; Dr. Spero Theodorou, our Chief Medical Officer; and Rafael Lickerman, our VP of Finance. Following the prepared remarks, we will all be available to answer your questions. The third quarter was the first time that we saw a slowdown and experienced normal seasonality that is common in the medical device industry in general and specifically in the aesthetic space. We ended Q3 with revenue of $123.1 million, a slight increase of 2% compared to the third quarter of 2022. Until the third quarter, InMode has been in an accelerated growth rate as we establish our presence in the U.S. and globally. Furthermore, the last three years of the COVID pandemic led to abnormal environment in the aesthetic space, resulting in pent-up demand and different aesthetic treatment patterns. Pre-pandemic, summertime hasn't been a popular time for aesthetic treatment due to travel and the requirement to avoid Sun post treatment. This summer, patients and physicians in the U.S. and in Europe return to normal seasonality cycle, and this trend was reflected in our Q3 financial results. In addition, record interest rate impacted the financing environment of new leasing agreement in our industry. Salespeople often say, time kill deals. And as the credit clearance process takes longer, less platforms were sold in the United States. However, despite these macro challenges, we were pleased to see that demand for InMode's treatment has not been slowed down and remain high. Patent and gold standard technology and innovation are InMode's key differentiator. We constantly improve and upgrade our technology. We remain committed to developing new minimally invasive technology and platforms as well as upgrading our existing platforms. In addition, we will aggressively enhance and protect our IP and patent. This will ensure our long-term position as leader in the industry and will enable us to benefit and become stronger following the current challenges in the market. Before I turn the call over to Shakil, I would like to reiterate our message regarding the conflict in Israel. As we said in our press release, our employees are safe and together with their management team in Israel and in the United States. We are all as committed as we have always been to the success of this company. InMode is committed to supporting all customers, distributors, employees and salespeople worldwide. We prioritize the safety and the well-being of our employees and will continue to do so as we execute our strategy. We don't anticipate any interruption to production, our inventory levels globally and in Israel are sufficient and include component and subassembly for the next three quarters. As a result, we expect all platforms and consumable will be delivered on time and will meet the highest standards. In addition, InMode take all required measures to ensure continuous customer support and exceptional service. We are all as committed as we have ever been to the company's success. Now I would like to turn the call over to Shakil, our President in North America. Shakil?

[Shakil Lakhani, executive]

Thanks, Moshe, and everyone, for joining us. InMode's third quarter was challenging for North America. Despite the headwinds of lower platform sales in North America in the third quarter, we are encouraged by the strength in consumable sales and view this year-over-year increase as an indication of continued demand for in modes treatments. Revenue from consumables and service accounted for 15% of total Q3 revenues and grew 28% year-over-year. We are pleased with the successful launch of Envision, our nonsurgical ophthalmic platform in Q3. It is progressing well in North America and is gaining traction among leading optometrists and ophthalmologists. Additionally, at the very end of Q3, we successfully launched DEFINE, the new and improved version of our hands-free technology for the face. We expect early revenues to be in Q4. As always, I'd like to thank our entire North American team and all employees everywhere for their continued hard work during these challenging times. I will now turn the call over to Yair for a review of the financial results in more detail. Yair?

[Yair Malca, executive]

Thanks, Shakil, and hello, everyone. Thanks again for joining us. InMode generated revenue of $123.1 million in the third quarter of 2023, representing a 2% year-over-year increase with a gross margin of 84% on a GAAP basis within the company model of 83% to 85%. Third quarter sales outside of the U.S. accounted for $44.9 million or 36% of sales compared to $39.8 million or 33% in Q3 of last year. We continue to see growth coming from different regions around the world. And in Q3, sales from Asia hit a new record. To support our operations and growth, InMode now operates in a total of 93 countries with a sales team of more than 267 direct reps and 82 distributors worldwide. Capital equipment in the third quarter represented 85% of total revenue, while Consumer base and service revenues accounted for the remaining 15%. Sales and marketing expenses increased to $50.8 million in the third quarter compared to $43.1 million in the same period last year. This increase is attributed to the addition of new sales of preservatives as well as investment in direct-to-consumer advertising campaigns and hosting in-person events. Share-based compensation accounted for $6.6 million in the third quarter of 2023, a decrease compared to $7.9 million in the third quarter of 2022. GAAP operating expenses in the third quarter were $56.6 million, a 16% increase year-over-year. On a non-GAAP basis, operating expenses were $50.6 million in this quarter compared to a total of $41.4 million in the same quarter of 2022, representing a 22% increase. GAAP operating margin for the third quarter of 2023 was 38% compared to operating margin of 44% in the third quarter of 2022. Non-GAAP operating margin for the third quarter of 2023 was 43% compared to 51% for the third quarter of 2022. GAAP diluted earnings per share for the third quarter were $0.54 compared to $0.58 per diluted share in Q3 of 2022. Non-GAAP diluted earnings per share for this quarter were $0.61 compared to $0.66 per diluted share in the third quarter of 2022. Once again, we ended the quarter with a strong balance sheet. As of September 30, 2023, the company had cash and categories, marketable securities and deposits of $675.8 million. Before I turn the call back to Moshe to take your questions, I'd like to reiterate our revised guidance for 2023. Revenue between $500 million and $510 million, non-GAAP gross margin between 83% and 85%. Non-GAAP income from operations between $220 million and $225 million. Non-GAAP earnings per diluted share of between $2.53 and $2.57. I will now turn over the call back to Moshe.

[Moshe Mizrahy, executive]

Thank you, Yair. Thank you, Shakil. Operator, we now can get Q&A.

[Operator]

[Operator Instructions] Today's first question comes from Matt Miksic with Barclays.

[Matthew Miksic, analyst]

And for the color around the results, I'm wondering if we could start with some of the things that caused the shortfall to the third quarter relative to Street estimates, even though I think directionally, it was in line with your increased seasonality. And I'm speaking of the pressure around financing and leasing costs and how that affected Q3. On that topic, just wondering if you have any additional color to share as we progress into Q4 here? And any thoughts across the management team as to what InMode can do to potentially alleviate some of those delays or pressures that caused a little bit of a slowdown there in Q3? And then I have one follow-up.

[Moshe Mizrahy, executive]

Okay. This is Moshe. I will try to answer, and I believe my colleagues will complement me. I believe we specified the three main reasons why we're a little bit short on what the market expects. First, I believe the seasonality, which is now normal in the medical aesthetic. As you probably know, in '21 and '22 were COVID year, and the COVID was in the beginning of the year. And therefore, Q3 was much stronger than expected and sometimes stronger than Q2. But that's not normal in the medical aesthetic. I've been in the medical aesthetic for 25 years, all the way from ESC, Lumenis, Syneron and now InMode. And it's always the case that the third quarter because summertime, because people don't want to get treatment during the summer and exposed to the sun on their vacation, it's a slower quarter and the fourth quarter usually is the strongest one. So this is one of the reasons, and I mean, we cannot avoid it. Second, as far as financing, what we said is that today, a leasing cost is 14% to 15% annually. That's the interest rate of leasing company charging customers. So I'm sure that you will not take a mortgage with 14% to 15% interest rate. Although this is a working machine to generate money, but the return on investment with this kind of interest rate will take longer. And of course, doctors are afraid what will happen. The economy is slowing down. Everybody can see that. It's not just in the medical aesthetic or in the medical field. And therefore, when the interest rates are still going up or at least did not start to go down and the leasing financing will cost 14% to 15%, I don't know for how long we believe that a doctor will think twice if they want to do it. Third reason is the fact that leasing company are tightening their procedure and their screening. They are afraid doctors will go bankrupt and they will not see the money. And therefore, before they issue a purchase order to us to actually take the order, they do a very long, I would say, a very long processing time. Sometimes it takes two to three weeks. And when you have two to three weeks, some of our competitors are coming, our doctors think twice. I already think maybe I need to wait a little bit. All this process is taking place now. How do we overcome it? I mean we have a lot of resources, especially we have a lot of money. And therefore, we're working with the leasing company to come up with some solution first, to optimize the processing. So it will not take three weeks. It might take a few days as it used to. We might do some other activity of in-house financing and other program to ease the financing to certain doctors. The main project is to work with the leasing company to find solution. We have some ideas. We already discussed it with them. We're in a process to implement that. Hopefully, in Q4, it will ease a little bit, not ease the rate. The rate will stay 14% to 15%, but at least ease the process and work better. That's the only thing that we can do. In addition to continued R&D, continue marketing, continued development, on the third quarter, this third quarter with the slowdown, we had 1,000 doctors use the meeting in Chicago in August, we have 400 doctors summit in Cyprus for 40 countries ROW. We actually continue to invest in IP and continue to invest in marketing. We participated in 12 medical conferences around the world. So we're not basically we're doubling down, what doubling down on any marketing, any sales promotion, R&D. We hired three more people in R&D in order to expedite coming with the new product to the market. We are not sitting down and cutting costs. That's the last thing that we will do, although it's a challenging time, but the company DNA is different. We will not fire people. We will not lay off people. We will keep everybody. On the contrary, we're hiring people this quarter, and we will continue to invest in marketing, in sales, in R&D, in regulation, in product development. We received two FDA approvals this quarter and which will enhance our position in the fourth quarter and next year. So overall, although we are taking the slowdown and the situation seriously, but we're not sitting down and wait to see what will happen in the market.

[Matthew Miksic, analyst]

That's a little helpful color. Just one follow-up, if I could, on some of the events that have unfolded unfortunately, in the past months in Israel, and you issued some comments around the time that this conflict began about your ability to supply and your supply chains risk of disruption ability to deliver product and so on. If you could maybe walk us through any updates that you have on that. And how far in 2024, do you feel confident that you're positioned to deliver given the current status of course?

[Moshe Mizrahy, executive]

Yes. Okay. Thank you for your question. Yes, it's a very difficult time in Israel, but we try to run the company business as usual. We have two production facilities both of them on the north part of Israel, which are not affected currently. They are not affected with the war that is mainly on the south part of Israel. All the team in Israel is safe. All were located in the northern part of Israel in a city called Yokne'am, which is relatively not close to the war area. All the team in Israel is safe and their families, we are taking care of them. We have accumulated inventory in the U.S. and in Israel and in some countries in Europe in order to take care of the supply for at least two quarters of finished goods and three quarters of component and subassembly. So we will cover everything. I'm optimistic, but I'm not a profit. I don't tell you that everything is 100%. Hopefully, the war will not extend to the northern part of Israel where we are located. And as far as that will not happen, and we will continue to have the situation as it is right now, everything will be okay. Also in the fourth quarter and the beginning of 2024. We have some employees on their Army Reserve duty, especially in the manufacturing side, but we took care of that by switching to work two shifts. We hired more people and that are not going to the reserve duty on the Army, and we're working to shift in order to keep the capacity the same as we plan. It's a 24 hours a day challenge. A 24 hours a day working. I mean, although it's not easy, but we're managing.

[Matthew Miksic, analyst]

I appreciate the update, and I wish you and all the teams out there the best.

[Operator]

And our next question today comes from Jeong Hee with Jefferies.

[Matthew Taylor, analyst]

I just wanted to ask a couple of questions about your forecast. Maybe you could talk to us about how you arrived at the 4Q forecast after seeing the seasonality and low growth in Q3? What are some of the key assumptions that you looked at in developing that? And as an extension, can you talk about your confidence in growing in 2024?

[Moshe Mizrahy, executive]

When you set the focus, you meant the guidance that we gave for last time?

[Matthew Taylor, analyst]

Well, for Q4 implied by the full year guidance.

[Moshe Mizrahy, executive]

Well, in order to meet the $500 million target, to be above the $500 million target as we stated, we need to do $140 million revenue in the fourth quarter. I can tell you that I have worked with all the territories, North America, Europe, Asia, Latin America. And currently, I believe we are going to meet this target of $140 million in the fourth quarter in order to be above the $500 million 2023 target that we gave. As far as Israel, we have all the capacity to supply everybody in the territories with the $140 million of platforms, handpieces, disposable. It's all in inventory. So from that side, we are not going to have a problem. From a sales point of view, I can tell you that October is always the first quarter of the quarter, and therefore, it does not reflect what's going on. As you know, more than 50% of the quarter revenue are being generated in the last month, which is December. But I'm very optimistic that we will do the $140 million. If it will not happen, we will notify everybody. Now regarding 2024, we do not have a target yet. We want to see what will happen on the market in Q4 as far as the slowdown and the slowdown in the economy and mainly on the medical aesthetic. Towards the end of the year, we will do some kind of analysis of all the territories. We are working on preparing a budget for 2024. And based on that, we will give a guidance.

[Matthew Taylor, analyst]

Maybe just one follow-up. I ask a question in a different way on Q4. The implied growth rate per your guidance at the midpoint is about 7% or so. So why is that the right number? Why wouldn't it be 2% or 12%? How did you arrive at 7%? What are some of the key inputs that are informing that level of growth versus something lower or higher?

[Moshe Mizrahy, executive]

Yair, do you want to answer that?

[Yair Malca, executive]

Sure. I think what we did is we looked at the different territories. We obviously see the slowdown impact more significantly in some of the territories than others. So some of them would not grow year-over-year. Some would and offset the ones that would not. Looking and taking all this into the mix, we like to this slight single-digit growth year-over-year. That's in terms of the revenue. In terms of profitability, we assume slightly decline in profitability, but not that much operating margin. In Q4, we expect it to be around 44%, which is a very healthy and respectable margin.

[Moshe Mizrahy, executive]

I just want to add something here as far as Yair talks about territories growth. Yes, Yair is right. For example, although it's relatively smaller than North America, but the market in Asia is not slowing down yet. Although we started seeing something on the fourth quarter, and therefore, we had to do some weighted average between the territories to come up with the guidance. As regard to profitability, I'm sure you noticed that our gross margin is still very high, 84% even with the inflation and the cost of component, which is going higher and higher every quarter. Because of inflation, we still maintain 84% without raising the prices on the market, without raising the prices of our equipment on the market. We did not raise price in any territory yet. We might, but not yet. And therefore, keeping the 84% gross margin on the third quarter, even in a slowdown time was a challenge. And I want to complement all the operation team, the manufacturing, the engineering, the design, everybody that's working. I would say, parallel to their regular work on new product development, working on how to improve, how to improve the process, how to improve the supply chain, how to improve the manufacturing and the testing in order to keep this 84% gross margin. It's not easy. That's something that everybody needs to remember. Our marketing and sales cost this quarter was a little bit higher than usual because we have several onetime events. User meeting in the U.S. for 1,000 doctors. Summit meeting in Cyprus. We bought a patent, which also costs that go to marketing. We also terminated one of our distributors in Germany in order to establish some subsidiary there. Our own fully owned subsidiary, and that cost us a little bit money. So we have some events in the third quarter that affect the marketing and sales expense by $3 million to $3.5 million, which are not general and not regular. And therefore, their operating earnings went a little bit down due to these expenses. But overall, even with the slowdown and even with all the challenging time that we're having in Israel and on the market, we managed to make a nice net profit and nice gross margin.

[Operator]

And our next question today comes from Danielle Antalffy with UBS.

[Ryan Barocas, analyst]

This is Ryan Barocas on for Danielle today. So just on Q3, I just want to try to better understand the timing of some of these impacts within the quarter to reconcile with some of the intra-quarter commentary you guys made. So when did you really begin to see the impact of seasonality in interest rates? And how much of the slowdown in Q3 and in Q4, comes from the impact on the financing side versus any potential real demand softening for your systems?

[Moshe Mizrahy, executive]

Well, I think it's very difficult to calculate how much from the slowdown came from the economy. How come from the slowdown came from the interest rate? How much from the slowdown came from the time take to approve leasing process? We never made this kind of calculation. For us, it's accumulate of all those reasons, or all those effects. I mean the fact that it's slowing down on the full economy, the fact that the doctor think twice if they want to buy equipment with 14% leasing package annual interest rate, the fact that it take longer to get the leasing and in the meantime, doctor think again if he wanted the system.In addition to that, I'm sure you know that more than 50% of the revenue are being generated in the last month of the quarter. That's always, that's not typical to slow down and not typical to anything. And especially that, if for example, in the last days of the quarter, you closed deal and you don't get finance, those deals stay on the table for the next quarter. And usually, they disappear. So you can put all those elements together in order to come up with what we have explained in the press release and now on the question. There is no quantitative calculation what will be the effect of each one of those factors. It's a combination of all.

[Ryan Barocas, analyst]

And then just on capital allocation, just love to get an update on your latest priorities there. So with cash now, just over 40% of your market cap. Is there any additional urgency on your end to put money to work here? And with the meaningful drop in your share price, would you more consider any share buyback or even a dividend program here?

[Moshe Mizrahy, executive]

Well, we thought about buyback. We thought about buyback for a long time. But I have to say two things. One, our previous experience with buyback. Actually, we did buyback for $100 million did not help. Did not help at all. And the stock did not react to that. It was not now. Second, I'm sure you know that one of our competitors, a company called HydraFacial, which market a product to the same market that we do mainly to Spar and less to doctors, but they sell also to doctors. They have announced six weeks ago, that they are doing buyback of $100 million. Official buyback $100 million. We all expected to Dell stock to go up. The stock price when they announced it was $6.3. The stock price today is $4. So they lost 35% of their value in the last six weeks right after they announced the buyback. So it's made us to think twice if this is the best way to support the stock, to do a buyback. Usually, we believe that buyback is something that will have a few days and the market will forget that. And therefore, we are better off keeping the money and looking for M&A opportunity, business development opportunity, things that we can do with the money better than just spending on buying stock. That's what I can say. We are exploring some opportunities for M&A. We have nothing to announce yet and nothing to show. We tried a few things, but the prices were too high for us. We try to find something that have the right profitability, although I'm not sure we will find something with 84% gross margin, but something similar, something that complements our technology, something that will be synergy to our business, but we don't want to do it in a rush. We don't want to do it in a rush. Maybe right now, in a slowdown situation, maybe there will be more opportunities, but that's something that we will explore.

[Operator]

And our next question today comes from Dan Reinhart with Baird.

[Dan Reinhart, analyst]

Maybe just a question for Shak here on the end consumer. And if you can give any color on what you're hearing from your surgeons, doctors out in the field. I mean I know you talked to the consumables growth still growing at a healthy greater than 25% or whatever, but that is down from a bit over 40% for the past few quarters. So just want to see if there's any incremental color that you can give there. And if you're seeing some patients, maybe defer, push out these procedures given the macro pressures right now?

[Shakil Lakhani, executive]

Yes, Dan, good question. I think it's a combination of both. So number one, what you just mentioned there. There's definitely some macroeconomic impact here. There's no question people are getting a little tighter with their wallets. But at the same time, I do think that from what Moshe has been saying, seasonality for Q3 there's a lot of patients going back to traditional seasonality within our industry, patients around vacation. They don't want to be in the sun, so on and so forth. So we did see a little bit of a slowdown. Obviously, we're still encouraged by the demand for it. It hasn't dropped off significantly, I would say. But I do think it's a combination of both the macroeconomic environment and the seasonality of the business.

[Dan Reinhart, analyst]

Okay. And then second question, probably for Yair here, maybe taking a different crack at the 2024 question. But I know previously, you guys have always talked about maybe doing $50 million incremental every year. And obviously, in the past few years, you've surpassed that potentially just with the COVID pent-up demand and tailwind effects there. But is that $50 million maybe something that's still in question as you're going into budget, or is that maybe a safe way to start? And then on the margin front, I mean, I know you guys have put in quite a few sales reps and other investments this year. So is this probably a better starting point to think off of and we can work from here? Or might there still be pressures just potentially from growing consumables and more in-person events still?

[Yair Malca, executive]

I would really prefer to wait to see how Q4 looks like before we provide any additional color on 2024. As you know, in Q3, there were two impacts going on for us, the slowdown and the seasonality. Seasonality is going to be off the table in Q4, and then we'll get a better feeling of what we see in terms of the headwinds that are directly related to the economy and only then we'll be in a better situation to discuss the 2024 guidance.

[Operator]

And our next question comes from Mike Matson with Needham & Company.

[Michael Matson, analyst]

Just given all the concerns out there about the GLP-1 weight loss drugs, I'm not going to ask about what impact you're seeing or expecting, but a question that I've gotten quite a bit from investors just trying to better understand InMode's exposure there. Is there a mix of body shaping procedures versus more skin tightening type procedures in your business? And I don't know if you even have visibility into that. But even if you could give us just some general sense of roughly the mix of those two types of procedures, at least I guess, within the minimally invasive part of your business. If it's like a rough percentage or something like that.

[Moshe Mizrahy, executive]

Shakil, can you answer that for the U.S., and I will answer for the [ IOW ]?

[Shakil Lakhani, executive]

Thanks Moshe. I think Spero should also jump in here. So yes, I think when it comes down to it, we've never been a weight loss company, right? So going to what you were saying about body shaping and skin tightening. I believe that if there are those patients that are going to be going through weight loss and experiencing that, we actually serve as a complementary adjunct to those things there. But Spero, do you want to talk about some of your practical experiences with this?

[Spero Theodorou, executive]

Yes. We get this question quite often. It's starting to taper down though. I think it's a little too early to make a decision on how the overall 30,000-foot view is going to look like in the future about this, but I can tell you one thing is for sure. Weight loss and lose skin is a problem. And these patients are definitely going to come to us. I'm not talking about the massive weight loss patients who have traditional plastic surgery done. That's definitely not going to change. I'm talking about the average weight loss of 10% that these drugs usually do or 15%, depending on which one they use. Those patients all are going to need some sort of skin-tightening procedure, and they're going to want it in a minimally invasive way in the office, not surgery, not in the hospital, and we're the best company to provide that. So we're positioned in a really good place to take advantage of that. And as a practicing plastic surgeon, I can tell you, my colleagues are starting to see more and more of it. So the trend is upwards. It's very positive. Morpheus as one is our leading commercial brand and what people are asking for and the demand shows it in the level of consumables and in the offices that we talk to. Now as far as body countering is concerned, liposuction has never been a weight loss procedure. So patients that are over 35 or 36 BMI are not really good candidates for liposuction. We definitely want them lower. So these drugs actually get these patients to a lower BMI where then they become candidates. So 28 BMI, 30 BMI ideal candidates even less start coming in for liposuction. So it puts them in the category where we can actually treat them. And the fact that we can actually do liposuction and tie their skin simultaneously with something like body tight, again, puts us in a really good place because that's differentiated technology that nobody else has. So overall, very optimistic. I know it sounds a little different than what people expect. Well, if I lose my way with the pill, I don't need plastic, sure, that's on the contrary. Once you start losing weight, you become more optimistic, you want to look better. It's a vanity procedure that we're offering, of course, and we're right there to take advantage of it. So the trends so far are positive and keep on getting better and better and better. So I can't tell you long term, but I can tell you, short term, we're seeing a positive impact in our surgeons across the country.

[Michael Matson, analyst]

And then I wanted to ask one on just the disclosure about this patent suit BTL. Can you maybe just talk about what products or technologies are involved there. The degree to which they have a presence in the U.S. with their competing product?

[Moshe Mizrahy, executive]

Are you're talking about the patent infringement lawsuit that we filed against them?

[Michael Matson, analyst]

Yes.

[Moshe Mizrahy, executive]

Okay. As you know, we were on the women health market for quite some time. We started with the Votiva and then with Empower. We have our own portfolio of patent on the women's health. And recently, we bought the full portfolio patent of women health from VV. VV used to be a NASDAQ-based company that tried to develop monopolar RF device for treatment of SUY. Finally, they did a study and the study was not successful and the FDA rejected their submission. They went bankrupt and we bought for $0.5 million, $480 something, all of their patent portfolio. One of their patent, which is the 511 patent specified in the press release that we issued as the prior date, even better than the patent of InMode. And based on this patent, which is owned by us right now, we filed a lawsuit against them because what they do is exactly infringe this patent. It's a one polar device for vaginal tightening and inside and outside. They are competing with us, and there is no reason why we will not protect our technology and know-how. It's in the early stage of the litigation. We filed it not long ago. We're waiting for their answer to that, but we're going to take them to Court.

[Operator]

And our next question today comes from Caitlin Cronin with Canaccord Genuity.

[Caitlin Cronin, analyst]

So I know you saw weakness this quarter in North American Capital. And just to touch further on what you're seeing in the rest of the world, what are you seeing in Q4 so far? And any signs of slowing there or plans in place to be proactive on the leasing front there?

[Moshe Mizrahy, executive]

Well, the rest of the world is similar to what you see in the United States. Interest rates in Europe are even higher than interest rates in the U.S. And even before, we had difficulties with leasing companies in Europe. We're finally working with the PRB Paribas, the French company and trying to do leasing in some of our subsidiary in Europe. Some of our distributors also have some sources of capital lending in order to help their customers. There was no different in the interest rate and also in the leasing process in other parts of the world. And therefore, Europe is behaving the same as in the United States. What will happen in 2024? We don't know what will happen with the leasing company in 2024. We anticipate that this will continue to be tough until interest rates will start to go down.

[Caitlin Cronin, analyst]

And then just a quick question on the U.S. side of the business. What capital systems and platforms really saw the weakest uptake during the Q3?

[Moshe Mizrahy, executive]

Shakil, that's your question.

[Shakil Lakhani, executive]

Sure. So I think it was just overall, as I mentioned before, we had some strong growth with Envision in doing the initial launch, which is successful so far with the defined launch towards the latter end of the quarter there. Hopefully, we'll see some of the rewards from that come into Q4. But overall, it was pretty much level across the board as we normally see it. It's just, again, as Moshe mentioned and the common theme here, the financing side of things in the macroeconomic environment, just slowed things down. But for the products that we did see, we've still been very strong on the minimally invasive side of things as Moshe has said, so on and so forth. And we're also staying steady with our women's health and wellness platforms as well.

[Operator]

And our next question is a follow-up from Jeong Hee at Jefferies.

[Matthew Taylor, analyst]

It's Matt again. I just had a follow-up question. I wanted to ask more about the GLP-1, I guess, tailwinds that you started talking about. I wanted to ask Spero, have you already seen this phenomenon where patients are losing right on GLP-1s and then coming in to get surgery? And if there is much broader adoption of them, do you think it could be a significant tailwind for InMode in the future?

[Spero Theodorou, executive]

So, it's a great question. I think the one thing I did not mention is the price of these medications. I think a person that's spending $1,500 a month, $2,000 a month to lose weight has already crossed the line to say, you know what, I want to look better and healthier. And the healthier part is secondary. It's usually I want to look better, just the way human nature is. So you're looking at a patient spending $10,000 to $15,000 in a year on these medications and committed. And now they definitely have lost the weight, but they've also looked worse. So once they've crossed that line, what we're seeing is for them to come in and have things done, to spend more money on a morphines treatment, for example, which is simple, $3,500 to $4,000. It's not a big deal. So I don't want to say it's like a gateway drug to us, but it kind of is. So I do think that's going to have a positive impact for us. We're seeing these patients come in. The term Ozempic face is a term that came up from a New York plastic surgeon as one of our KOLs. So that goes to show you that we're very aware, very engaged. Our doctors are definitely involved. You see the different names come up from Ozempic butts, Ozempic faces. These are plastic surgeons or aesthetic doctors coming up with this terminology. And the reason they're coming up with terminology is they're creating an environment and educating patients for them to come to their practice and have these treatments done. So definitely, I think there's going to be a positive impact for us and the trends so far are looking that way. Does that answer your question? I'm not quite sure. Is that what you were asking?

[Matthew Taylor, analyst]

Yes, that's it. I just wanted some confirmation of that. The other thing I wanted to ask you about, I noticed you're in the news recently talking about some of the dangers with fillers. And so I was hoping maybe you could just touch on that and whether that might actually also lead folks to InMode's treatments versus using a killer option?

[Spero Theodorou, executive]

Yes, sure. That's separate work. I am a practicing plastic surgeon, so it's not necessarily InMode sponsored the work I do. It's completely different. But as physicians and we have to be leaders in what we do. And the concern with the fillers is real. We were the first to the group that I did the study with proved that fillers do block lymphatics. And that study is coming out soon. But how does that impact? Well, we do have doctors that are using InMode's technology. Morpheus is a combination with hyaluronic based. There's a doctor in LA, his name is coming [ Kaman Pasha ]. He is doing great with it as a two-year waiting list. So overall, we had to step back, I think that what's going to happen in the next two to three years as patients and especially women, be the majority of these patients are having fillers are going to look -- it's going to be a push towards biologics. Whether that's fat, whether it's a filler that's not hyaluronic based with a lot of cross-linking. Patients are going to be seeking more natural sort of things. And are we looking at all these things in what, of course, we are. But that has to do specifically with the trends. And I think that if you look at any device in plastic surgery, it takes about 20 years for it to start having problems. The same thing happened with implants back in the past. So I personally feel strongly about it. This is not representing InMode's a certain thoughts or this is something I've done independently, but as my position in this company, it's important that we always take good care of patients. We find the best treatments for them. And InMode does have that reputation that our equipment works. So in that line, whatever we're looking for in the past in M&A has to usually go along those lines as well. So did that answer your question more or less?

[Matthew Taylor, analyst]

Yes. That's great.

[Operator]

Thank you. And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Moshe Mizrahy, Chairman and CEO, for closing remarks.

[Moshe Mizrahy, executive]

Thank you, operator. Again, thanks to all of you who participated in this earnings call. I would like to thank all InMode employees worldwide that work hard on the third quarter, facing the challenging that we have discussed today. Especially, I want to thank all the InMode team in Israel under this war situation, working every day, sometime 16 hours a day in order to make sure that we will comply with all the promises that we make worldwide, deliver on time. We all hope that Q4 will get better as far as the market. Usually, Q4 is stronger. We have some challenge to hit the number for Q4 in order to be within the target that we gave. But we're doing everything we can, as always, to meet that. Again, thank you all. Bye-bye.

[Operator]

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.