Shares of InMode (INMD, Financial), an Israel-based maker of medical devices for cosmetic treatments, have declined after missing 1Q25 EPS expectations and lowering its FY25 EPS guidance. The company had previously cut its Q1 revenue guidance to $77.2-$77.5 million but maintained its EPS outlook, resulting in a mixed performance with earnings falling short of expectations despite in-line revenue.
While InMode is experiencing strong international growth, particularly in Europe with record revenue, weakening consumer demand in the U.S. is affecting top-line growth and margins. The company estimates challenging U.S. conditions have led to a 4-5% decline in operating margins.
- InMode's "razor-and-blade" business model, similar to Intuitive Surgical (ISRG, Financial), was previously supported by strong demand for consumables and services. However, Q1 saw a 10% year-over-year decline in consumables and services revenue due to reduced procedure volumes as consumers delay elective procedures amid economic uncertainty and high inflation.
- Tariffs are another challenge, with current U.S. tariffs at 10% expected to negatively impact gross margins by 2-3%. Tariffs could further pressure capital equipment sales if InMode passes higher costs to customers. Some clinics are already delaying new equipment purchases, which will eventually affect consumables sales.
- Strong international growth helped mitigate the overall 3% revenue decline, with international markets, especially Europe, accounting for a larger share of total revenue in Q1.
- InMode is optimistic about its recent launches of the Optimus Max and Ignite RF devices, which could offset macroeconomic headwinds. The Optimas Max platform, offering a comprehensive suite of procedures, could attract a wider range of patients, boosting revenue for clinics and InMode.
InMode's business model is poised to benefit from a trend favoring minimally invasive procedures, supporting stable recurring revenue from consumables. However, weak capital equipment demand and a reduction in elective procedures in the U.S. present near-term challenges.
