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No. of Recommendations: 9
Hi Fools!

Breathing some life into this board given that it's a new decade and all. :-)

I recently posted a thread on Twitter about InMode, a recent IPO. I've pasted it below or you can take a look on Twitter: https://twitter.com/David_Kretzmann/status/12161045633438720...

Surprised that InMode (INMD) hasn't gotten more attention. What am I missing?

InMode develops minimally-invasive medical products... everything from liposuction to wrinkle reduction, skin rejuvantion, hair removal, & more. It fills the gap between lasers and plastic surgery.

InMode's secret sauce is its radiofrequency technology. The technology enables face and body contouring without the scars that come from surgery. Patients get 90% of the results they'd get from a plastic surgery.... without the surgery, scars, and recovery time.

The company's launched six product platforms since 2010 and has multiple patents, the oldest of which expires in 12 years. InMode has an installed base of 4,400 systems worldwide, with a target market of surgically-trained physicians (100k+ in the U.S. and 200k+ globally).

Any product InMode develops needs a gross margin of 85%+.

Once a system is sold, it opens the door for repeat consumables sales (still unclear what % of revenue this is today) as well as new/additional platforms InMode develops. InMode aims to develop two new platforms annually.

Right now 80% of revenue comes from the U.S. and 20% internationally. Management expects this to move to 50/50 in the coming years.

InMode already sells to 49 countries today, and is awaiting regulatory approval in countries like China, Brazil, Korea, and Taiwan.

InMode is based in Israel, co-founded by Moshe Mizrahy (now chairman and CEO) and Dr. Michael Kreindel (now CTO). Mizrahy owns 18.7% and Kreindel owns 16% of the company. Healthy skin in the game.

InMode has significant "Approved Enterprise" tax advantages in Israel, for now.

Numbers look promising:

Revenue: $138M (up 57.4%)
Gross margin: 86.9%
Operating margin: 36.9%
Free cash flow: $43.6M
$165.3M in net cash

Extremely profitable, quickly-growing biz that's trading for 34x earnings and 33x free cash flow. Seems reasonable.

Biggest risks/questions I have:

- What's the likelihood this technology isn't leapfrogged by a competitor or new entrant?

- What happens if regulators change their tune (for whatever reason)?

- Will people still care about their appearance in 5+ years? (lol jk)

The growth drivers as I see them:

- Continued penetration globally with InMode's existing products
- Regulatory approval in new int'l markets
- Growing repeat sales via consumables
- New products/platforms to expand use cases and cross-sell to existing customers

I'm still learning but color me intrigued. (h/t to TMFTypeoh for the intro to INMD)

Financials are rock-solid. Founder-led with skin in the game. Technology seems strong and increasingly relevant w/ many growth opportunities ahead.

So back to my first question: what am I missing?

Foolishly,
David K
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Good to see you Pencils. TMF's Beth McKenna did a write-up of Inmode last month:

It has a potentially huge total addressable market, with the global market for aesthetic procedures increasing, driven by the population aging and becoming heavier.

https://www.fool.com/premium/coverage/investing/2019/12/02/w...

My initial reaction is that new IPOs are a dime a dozen, especially in the biomedical market space, and explosive growth out of the gate makes me more nervous than excited. I don't want to cheapen the company by saying that businesses like this are a dime a dozen or that chances are that it will merge or be acquired by a bigger biobeast, but I will say that I want to see them prove themselves first as a public entity. Give it a year or so to see if their first quarter of public earnings are just IPO exuberance or the first of many in this young company's future.

Fuskie
Who thinks it has lots of potential but it is still feeling out its legs as a public company and he wants to watch until it becomes a little more mature...

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Hi David,

Not sure it helps. I saw this message on Twitter about INMD


https://twitter.com/saxena_puru/status/1215434245373489152?s...
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https://boards.fool.com/inmd-inmode-34372227.aspx?sort=whole...
Some discussion happened on Saul board but not useful
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Interested to find someone else looking at INMD.

I found them by accident using a screener during the crash, looking for companies under 1.5B with little to no debt on the balance sheet, growing revenues over 40 percent and that had had a drop of 35 percent or more from 52 wk highs.

Only 2 companies came up and honestly I got so blown away by the opportunity (very much the same sentiment as you... What am I missing?) that I don't even remember the name of the 2nd company (if I remember rightly growth was skewed by a one-off payment). Suffice to say I opened starter position that then became a full size position over the few weeks since.

1st quarter earnings seemed positive, though of course with a lack of visibility. They have kept on all staff and actually made new hires to increase sales staff by about 10 percent.

They sounded very positive about international growth, particularly opportunities in Brazil where they are about to launch (huge plastic surgery market!). They also spoke in cagey terms about 2 new platforms they are looking to launch this year.

They have quite a few celebrities that use their procedures, and it looks to me like a company that may well hit a much higher valuation within a year or two and could even build some brand awareness and brand loyalty before patents run out. Not to mention the possibility of leveraging the consumables side of things once they have the demand and systems in place. A little like ISRG.

One thing I did notice, and this may explain the cheapness of the stock at the moment (I believe they are trading at under 20 x forward earnings with 40 percent revenue growth and 85 percent gross margins!) was that there were not many analysts covering their earnings call.

Sorry for this rambling post, but as you can tell I am bullish this company and think it could easily become a 5x with 5 years (and even that may be conservative) if some things go right for them...
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