InMode Ltd. — 2020 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone Q4 filing; it also includes unaudited quarterly results. Financial statements are prepared under U.S. GAAP and audited by PwC’s Israeli member firm.
Business context
InMode develops and sells energy-based medical aesthetic devices, including minimally invasive, non-invasive and hands-free platforms, principally using radiofrequency technology. It launched Evoke and Morpheus8 in 2020. At year-end, the company reported approximately 7,250 platforms installed globally, 154 direct sales representatives and 39 distributors serving 47 countries.
Key financial metrics
| Metric | FY 2020 | FY 2019 |
|---|---|---|
| Revenue | $206.1 million | $156.4 million |
| Gross profit / gross margin | $175.3 million / 85% | $136.1 million / 87% |
| Operating income / margin | $72.8 million / 35% | $59.6 million / 38% |
| Net income | $75.0 million | $61.2 million |
| Net income attributable to InMode | $75.0 million | $61.1 million |
| Net income per share, basic / diluted | $2.08 / $1.78 | $2.09 / $1.60 |
| Cash provided by operations | $79.2 million | $62.2 million |
Revenue rose 32%. Minimally invasive platform sales were $127.4 million, hands-free platform sales $65.3 million, and non-invasive platform sales $13.4 million. The U.S. generated 73% of revenue; international markets generated 27%. Consumables and extended warranties contributed approximately 10% of revenue.
For Q4 2020, revenue was $75.2 million versus $47.0 million in Q4 2019; net income was $36.1 million versus $19.0 million. The filing describes quarterly results as unaudited.
At December 31, 2020, cash and cash equivalents were $68.9 million, marketable securities $142.0 million, and short-term bank deposits $49.6 million—$260.5 million combined. Working capital was $254.6 million; total assets were $295.8 million and total liabilities $40.3 million. The company reported no bank debt or other debt financing. Cash and cash equivalents increased by $24.2 million during the year.
Material changes versus 2019
- Revenue growth was led by hands-free platforms, whose sales increased $52.1 million; minimally invasive platform sales increased $3.8 million, while non-invasive platform sales declined $6.1 million.
- International revenue grew 76%, compared with 20% growth in the United States.
- Gross margin declined to 85% from 87%, which management primarily attributed to a higher share of distributor sales.
- Sales and marketing expense increased 29% to $86.5 million, including costs of expanding the sales organization and higher share-based compensation. Research and development expense rose 66% to $9.5 million.
- Share-based compensation expense increased to $12.8 million from $1.6 million. The company repriced or replaced certain options in March 2020; incremental fair value was $3.3 million.
- The company repurchased 393,441 shares for $17.2 million in Q4 under a program authorizing purchases of up to one million shares.
Outlook, commentary, risks and unusual items
- Outlook: No formal financial revenue or earnings guidance is provided. Management expected platforms under development to contribute to 2021 growth and anticipated 2021 capital expenditures of up to $1 million, funded from existing cash. A new ophthalmology platform was planned for introduction in 2021; development-stage products and indications remain subject to research and regulatory requirements.
- COVID-19: Restrictions and pauses in elective procedures disrupted sales and marketing activity, travel and in-person events. Management reported that COVID-related price concessions had an immaterial effect at year-end, but said future effects remained uncertain.
- Tax: The Israeli Benefited Enterprise tax exemption applies to qualifying undistributed income and is scheduled to end in 2021. The company recorded $1.1 million of income tax expense and a $16.7 million tax benefit from the status in 2020. Management expected a 7.5%–9% corporate tax rate from 2022 under an alternative technology-enterprise regime; the notes state the company had not elected that regime as of year-end. A $2.9 million reserve for uncertain tax positions was recorded, identified by the auditor as a critical audit matter.
- Operating risks: Most manufacturing is outsourced to a small number of Israeli subcontractors, with substantial dependence on two. Other material risks include demand for elective, generally non-reimbursed procedures; competition and product adoption; regulatory clearances and marketing restrictions; product liability; intellectual property claims; and geopolitical, supply-chain and currency exposures.
- Legal matters: The patent dispute with Syneron-Candela and Massachusetts General Hospital was settled in 2019 for a one-time payment, with a paid-up, royalty-free sublicense. The report describes no significant changes after December 31, 2020.
- Controls: Management and the auditor concluded that internal control over financial reporting was effective at year-end; the auditor issued an unqualified opinion on the financial statements and controls.
Investor facts to verify
- Reconcile the Q4 revenue and earnings surge with quarterly seasonality, new-platform sales and the year’s COVID-related disruption.
- Assess the sustainability and cash conversion of growth, including receivables, inventory and contract-liability movements, and the composition and maturities of the $260.5 million liquidity pool.
- Review the gross-margin decline and whether distributor mix, international growth and product mix may continue to affect margins.
- Confirm the post-2021 Israeli tax treatment, applicable eligibility conditions and potential effects on reported earnings and cash taxes; review the uncertain-tax-position reserve.
- Monitor dependence on Israeli manufacturers and suppliers, regulatory status and permitted product claims, and progress and costs for products still in development.