Good day and welcome to the InMode Limited Fourth Quarter and Full-Year 2020 Conference Call. All participants will be in a listen-only mode. Operator Instructions. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Miri Segal of MS-IR. Please go ahead.

Thank you, operator, and good day to everybody. I would like to welcome all of you to InMode's fourth quarter and full-year 2020 financial results conference call. With us on the line today are Mr. Moshe Mizrahy, Chairman of the Board & CEO; Dr. Michael Kreindel, Co-Founder and CTO; Mr. Yair Malca, CFO; Dr. Spero Theodorou, CMO; and Mr. Shakil Lakhani, President of InMode North America. 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 view it in 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. Moshe will begin the call with a business update, and turn it over to Shakil Lakhani, InMode's President of North America to discuss our North American operations, followed by Yair Malca, InMode's CFO with an overview of the financials. We will then open the call for the question-and-answer session. I'll now turn the call to Moshe Mizrahy, InMode's CEO. Moshe, please go ahead.

Thank you, Miri. And thanks to all of you for joining our fourth quarter and full-year 2020 financial results conference call. With me on the call today are Yair Malca, our CFO, Shakil Lakhani, our President of North America, Dr. Michael Kreindel, our Co-Founder and Chief Technology Officer and Dr. Spero Theodorou, our Chief Medical Officer. Also with me in Israel, Rafi Lickerman, our VP of Finance. 2020, what a year it was. I believe that we will all remember this year for the rest of our lives. I remember our earnings call in February 2020 before the crisis hit the market. We all expected another momentous year, and none of us had any clue what would take place only one month later. In March 2020, the world stood still, all of our sales activity stopped. And none of us knew how things would unfold. But as Churchill said, never let a good crisis go to waste. With that in mind, it took us a few days to recover and put together a worldwide plan based on four major decisions. One, not to lay off any of our employees; two, to continue to work business as usual in all other businesses, disciplined other than sales; three, to help out InMode's supply chain at all levels from component manufacturers through to our distributors, so that they could also operate in spite of the crisis; four, to use the time to upgrade our infrastructure worldwide and to train our team and our customers, doctors, and prepare them for the day after the crisis. This strategy paid off big time when business began to get back to normal just before the summer. In the fourth quarter of 2020, InMode generated record revenue of $75.2 million, a 60% increase from the fourth quarter of 2019, a record of $36.1 million net income on a GAAP basis and $39.9 million of net income on a non-GAAP basis. For the full year of 2020, InMode generated record revenue of $206.1 million, a 32% increase from the full year of 2019, a record net income of $75 million and $89.1 million of net income on a non-GAAP basis. In the full year of 2020, approximately 62% of our revenue derived from our surgical platforms engaged in minimally invasive and subdermal ablative treatments, 32% derived from our recently introduced hands-free platform, and only 6% from our traditional laser and non-invasive RF platform. The record revenue in the fourth quarter and the full year was driven by demand for our minimally invasive and hands-free proprietary electrosurgical bipolar RF technology. The U.S. was a significant component in our performance, while International sales became a major growth engine with the full-year 2020 International revenue more than doubling year-over-year. During the year, we saw accelerated demand from our new product launches as our hands-free devices enable social distancing and allow physicians to offer solutions that customers feel comfortable with, while effectively treating the entire body and face. The success we have had, despite the outbreak of the global pandemic, is a testament to our organization, dedication, and innovative technology. As we look back on our actions in 2020, we're proud of the decision to not only retain our workforce during the COVID-19 pandemic but expand our sales and marketing team, continue investing in our R&D and in our infrastructure and progress our regulatory processes in the U.S. and elsewhere around the world. We were confident in the future of InMode and saw this as an opportunity to cement ourselves as the market leader. As a result of our bold steps, we were able to capture pent-up demand for our new hands-free and minimally invasive devices, Evoke, Evolve and Morpheus8. Additionally, we managed to penetrate new medical categories such as OB/GYN offering complementary solutions to our Votiva practices. As we introduce additional technologies in 2021, we plan to expand into the ophthalmology market while continuing to grow our presence in the plastic surgery, dermatology, and OB/GYN communities. Our goal is to introduce two new platforms each year and continue to diversify our R&D pipeline to offer wellness aesthetic solutions, as well as other medical indications and to continue to innovate. Additionally, we plan to further expand our international sales and marketing operations, with a focus on Europe and Asia-Pacific. In 2021, our initial success in this region gives us confidence that we can capture market opportunities as the world gradually recovers from the pandemic. As we expand into new regions and medical categories, we plan to continue developing patent protection for our novel methods and RF technology that differentiate our product portfolio. Also, we'll continue to defend our existing intellectual property. The success of InMode so far has come from our innovation and the ability to generate interest across medical communities for our platforms. The fact that our devices and platforms can effectively be performed in the doctor’s office without the need for anesthesia or any other invasive method has appealed to both patients and physicians alike. We'll continue to deliver industry-leading solutions using our unique technology to bridge the current significant treatment gap. Considering our successful performance in 2020, we're providing full-year 2021 guidance of revenue between $250 million and $260 million. Non-GAAP gross margin between 84% and 86%, non-GAAP income from operations between $100 million and $104 million, and a non-GAAP earnings per diluted share between $2.34 and $2.45. Lastly, as part of our recently introduced corporate social responsibility, we place a high value on our employees, partners, and stakeholders across the growing number of communities and markets we operate in. We aim to positively impact local economies in the U.S. and in the rest of the world and will continue to prioritize the health and welfare of our employees and customers. With that, I'd like to turn the call to Shakil, our President of North America. Shakil?

Thanks, Moshe, and hello everyone. We reported a record fourth quarter and full-year in North America as accelerated demand for our new product launches led to record capital equipment and consumable volume. It was very encouraging to see high levels of consumable purchases coincide with capital equipment sales. This clearly indicated that physicians were treating patients at pre-pandemic volumes and have successfully adapted to the restrictions of COVID-19. We were very pleased with the reception of our new products, Evolve, Evoke and Morpheus8. These products proved to be high in demand not only by physicians but also patients. The momentum we saw in the second half of 2020 supported our decision to continue investing in our sales and marketing organization back in March and April. We were able to bring in some of the top talent from across the industry during the market contraction earlier this year. This enabled us to successfully capture the pent-up demand for our products following the easing of restrictions. One of the key initiatives to keep physicians engaged during the pandemic was the use of technology. We introduced InMode University, our web-based educational resource for physicians and aesthetic providers, creating an impressive library of online tutorials and training content to sharpen the skills of our sales force and educate physicians on our newest products. The COVID-19 global pandemic accelerated consumer trends driven by efficiency, results, and innovation, which are the core building blocks of our organization. Additionally, as the world transitions work and socialization to virtual meeting applications, such as this, people are spending more time than ever analyzing their appearances. This trend, along with the flexibility of working remotely, has created the need and opportunity for patients to visit physician offices and request aesthetic procedures more frequently. We believe that these trends are here to stay, and we'll continue to provide our innovative solutions to physicians and patients. Coming out of 2020, our sales and marketing team has created a successful multi-pronged approach to introduce InMode's latest technologies. Our ability to penetrate new offices and medical categories with new products is unparalleled, which is illustrated by our financial performance this year. Once again, we were proud of our team for their resilience and determination during this pandemic, and we're excited to take InMode's momentum into the new year. Now let me hand over the call to Yair to review our financial results in detail. Yair?

Thanks, Shakil. Good day everyone. Total revenue in the fourth quarter of 2020 increased 60% to $75.2 million, with a gross margin of 86% on a GAAP basis. The increase in revenues was driven primarily by the expansion of InMode's direct sales organization in the United States and the continued momentum of InMode's hands-free technology, as well as the recently introduced Morpheus8 Body fractional technology. Additionally, InMode continued to gain traction in international markets, with international revenues growing 102% year-over-year. GAAP operating expenses in the fourth quarter of 2020 totaled approximately $29.2 million, a 27% increase from the fourth quarter of 2019. Sales and marketing expenses increased 25.4% in the fourth quarter of 2020 compared to the fourth quarter of 2019. Stock-based compensation increased to $3.2 million in the fourth quarter of 2020 compared to $2.4 million in the third quarter of 2020. This increase is due to higher than previously estimated vesting of our performance-based options as a result of a record revenue in the fourth quarter. On a non-GAAP basis, operating expenses totaled approximately $26.1 million in the fourth quarter of 2020 compared to operating expenses of $22.7 million in the fourth quarter of 2019, an increase of 15.1%. GAAP operating margin was 47% in the fourth quarter of 2020 compared to 38% in the fourth quarter of 2019. Non-GAAP operating margin in the fourth quarter of 2020 was 51% compared to 39% in the fourth quarter of 2019. This increase in non-GAAP operating margin was primarily attributable to decreased travel and marketing activities in the United States, such as events and conference participation, due to restrictions caused by the COVID-19 pandemic. GAAP diluted earnings per share in the fourth quarter of 2020 was $0.85 compared to $0.46 per diluted share in the fourth quarter of 2019. Non-GAAP diluted earnings per share in the fourth quarter of 2020 were $0.94 compared to $0.46 per diluted share in the fourth quarter of 2019. We completed our fourth quarter with a strong balance sheet. As of December 31, 2020, the company had cash, cash equivalents, marketable securities and deposits of $260.5 million. On the cash flow front, the company generated $41.6 million from operating activities for the fourth quarter of 2020 driven by the record sales volume. Total revenue in the full year of 2020 grew 32% to a record of $206.1 million, with a gross margin of 85% on a GAAP basis. Year-over-year international revenue growth was 76% in 2020. GAAP operating expenses in the full year of 2020 totaled approximately $102.4 million, a 33.9% increase from the full-year of 2019. On a non-GAAP basis, operating expenses totaled $90.1 million in the full year of 2020, compared to operating expenses of $75 million in the year of 2019, an increase of 20.1%. GAAP operating margin was 35% in the full-year of 2020 compared to 38% for the full year of 2019. Non-GAAP operating margin for the full year of 2020 was 42% compared to 39% for the full-year of 2019. This increase in non-GAAP operating margin was, as previously mentioned, attributable to decreased travel and marketing activities due to the pandemic. GAAP diluted earnings per share in the full year of 2020 were $1.78 compared to $1.60 per diluted share in the full year of 2019. Non-GAAP diluted earnings per share in the full year of 2020 were $2.11 compared to $1.63 per diluted share in the full year of 2019, an increase of 29.4%. On the cash flow front, the company generated $79.2 million from operating activities for the full year of 2020. With that, I'll turn the call back to Moshe. Moshe?

Pardon me, this is the operator. Moshe has disconnected. We will connect in a minute, just hold the line please.

Thank you. Operator?

Pardon me. We're going to start the question-and-answer session. Operator Instructions. Our first question today comes from Matt Taylor with UBS. Please go ahead.

Hi guys, thank you for taking the question and congrats on the good quarter. So the first thing I want to start off with was just understanding the guidance for 2021. The way I'll frame the question is, you obviously had a very strong Q4, and you're at a $75 million run rate. So can you talk to us about how you derived the $250 million to $260 million that would imply average sales below that run rate? Was there some stuff that was one-time in Q4? Are you just being conservative to start the year? Maybe you could talk about some of the ongoing trends and what you're seeing?

Hi, Matt. This is Moshe, I'm back again. I was disconnected, sorry.

No problem.

Yes, sorry. The $75 million in the fourth quarter, I believe that we gave you how it was divided between the products. It was something like 62% on minimally invasive and 30-something percent on hands-free. The $260 million we need to remember that we're going to add another two platforms. So percentage-wise, I believe maybe, although they will grow in absolute numbers, but percentage-wise, minimally invasive and the hands-free will go a little bit down, and the OB/GYN business will go up from a few percentage to something like maybe 7% to 9%. All the rest will stay the same, the laser and the regular RF non-invasive will continue to be in the neighborhood of 5%.

Okay, thank you. And can you comment on any trends you're seeing here early in 2021? Are you continuing to see strong demand for procedures and for capital?

Oh yes, yes, that disposable that we're selling, we reached a record in Q4 and in the beginning of this year, so far very strong demand for consumables which are being used, as you know, in the minimally invasive and ablative, and also on the Votiva, the women's health platform. So hopefully, and the way it looks like, we will break the record again in Q1.

And Matt, just to add there, as far as what we've seen momentum-wise January is typically a slower month. We've seen some really good momentum come up in February here. And normally February and March are kind of the bulk of Q1. So it's tracking in a positive way.

Thanks, Shak. Maybe I'll just ask one more, so you highlighted this women's health offering and I know you're beefing it up for a bigger launch here in 2021. Can you talk about the components of that? How you expect to market it and how it's differentiated from some of the other systems that are out there?

Spero, you want to answer that?

Matt, why don't I start off, and I'll pass it over to Spero. So basically, as we know, there's been in the past, there's basically been a lot, there were worse than other companies and competitors in the space in the women's health and wellness market, and many of them have actually left the space based on what happened a year-and-a-half, two years ago, with the FDA. However, we decided to invest very heavily in this. And essentially what we're going to do without giving away too much, as you know, what we would like to do in this case, and with the technology that we'll be launching is it will not just be a unique focus product. So we're not just going to have it focused on one aspect of the women's health and wellness. The idea with this is to have a multi-pronged approach to it, where we can actually have multiple revenue streams for physicians and also beneficial ways of treating the women's health and wellness market. Spero, did you want to just add on to that?

Thank you for the question, Matt. At InMode, we strive to support our initiatives with solid scientific backing and peer-reviewed publications. When addressing long-standing issues affecting women, we've taken a step back to determine the best approach over the past two years. We're now confident in offering various solutions that haven't been adequately addressed before, particularly since radio frequency technology differs significantly from lasers. Our ability to penetrate deeper, remodel tissue, and the fact that RF is not influenced by pigmentation is central to our efforts in women's health. We're also incorporating successful technologies like Morpheus8 microneedling into women's health applications, enhancing the capabilities of the Morpheus8 platform alongside the Evolve platform, which has proven effective. These fundamental components will be part of our ongoing solutions for women. I apologize if I seem vague, but we prefer to avoid preempting our announcements. However, I want to assure you of our confidence in our products, which have a track record of success and a strong reputation among clinicians and patients, and we aim to maintain that standard.

Operator Instructions. The next question comes from Kyle Rose with Canaccord. Please go ahead.

Hi, good morning everyone. Thank you for taking the questions. Just a few for me. I wanted to see if you can, Shak you talked about some of the strengthening of the commercial team that took place in 2020. Just wondering if you could help us understand that a little bit more. I mean maybe where did you end from a headcount perspective, and then how should we think about hiring moving forward? I mean is there any real whitespace left when we think about territories to build out? Do you need to build specialized teams to go after some of these specialized markets? Could you help us understand how the sales force should trend over the coming 12 to 24 months?

Sure, Kyle. Great question. So I think first and foremost, we ended up around 134 headcount for the year; we're definitely going to be adding to that. When it comes to the specialized sales force, it's tricky. Based on my experience, it can go either way. But I think learning from some of the things in my past and in the years past, I think the way we're going to look at this, Kyle, is we're going to take a hybrid approach to it. In this business, it's very challenging to find people who can close capital equipment. Luckily, we've found that formula. We're going to take that integrated within that and kind of have a farming system similar to what you see in the major leagues. So I think as we start to develop some of our people, all of our Salesforce, they all want upward mobility. And we know that and we support that 100%. So I think in doing that, as they can kind of learn from the skill sets that they need in order to close business and find business and so on and so forth. Now, the women's health and wellness space is a very, very specialized sale, OB/GYN urologist or gynecologists, this is within their scope of practice, right and within their scope of specialty. So we need to have people that can actually talk their lingo and understand what they're going to benefit from this. So I think with that being said, we have a plan to do that. But what we'd like to do is take a hybrid approach to it, see how that's going, and then eventually transition to potentially specialized teams. Does that make sense, Kyle?

It does, that's very helpful. Thank you. And then, Moshe, I wanted to circle back just on Matt's questions, just with respect to guidance for the year. And I appreciate you framing it out with respect to the product categories, but maybe just help us understand. I mean you exited in the second half of the year, particularly Q4 with record numbers and guidance for the full-year 2021 is suggesting a little bit of a slowdown, I'm just trying to understand is that more just, is it still ongoing dynamics from COVID. Is it the timing of new product launches? Just because to get to that $250 million, $260 million, it does suggest a step down, so maybe help us understand what you're assuming, as far as the puts and takes of what happens in 2021?

I appreciate your inquiry. Over the past few years, our revenue has been consistently around $50 million annually. While we anticipate moving from $206 million to $260 million, that $50 million increase remains significant. Although percentage-wise this growth may seem less impressive when comparing figures from 2019 to 2020, generating $50 million every year in the medical equipment sector—especially given the complexities of regulations and clinical studies—is no small feat. We aim to surpass this figure, ideally reaching above $260 million. We consider this guidance of $260 million, which is $55 million above our 2020 results, as a reasonable target. While it's tempting to project our fourth quarter performance of $75 million over four quarters, resulting in an expected $300 million, we have previously discussed the seasonal nature of our business, where the fourth quarter typically accounts for about 40% of the annual total. Although we hope to achieve that, it may exceed our guidance. Moreover, we still anticipate impacts from the pandemic in the first quarter, particularly in Europe experiencing a second wave. In the U.S., the situation is improving, but challenges persist in South America, and while some Asian countries are doing better, others like India are facing difficulties. Overall, we see the pandemic continuing to influence our first quarter, and while we accounted for this in our budget, we are determined to overcome the challenge of reaching $260 million in 2021.

Thank you very much. And then just one final question for me, Shak or Spero, I think the one thing that surprised us in 2020 was the durability of the interest from patients as far as you're getting treatments. I think there's a lot of conjecture or reasons for that, why that might have happened. I just wanted to see if you can maybe give us your thoughts on the pulse of the market as we head into 2021, particularly hopefully the market reopens, people are out doing more, do you expect to continue to be a big focus on image and wellness and disposable income being allocated towards these types of procedures, just what you're seeing from the commercial field or your peers?

Yes, no, great question, and I'll pass it over to Spero after I talk a little more from the patient perspective. But I think one of the things that we saw very early on with the pandemic is that no one really knew how to deal with it. So it was foreign to everybody. I think once we got to the point where people learned how to, you go from having 10 to 15 people sitting in your waiting room to now having people coming in checking their temperature, and then having them come in, it almost feels like a VIP type of experience for them, right. So I think now that that physicians have learned, and patients have learned how to deal with the pandemic, they're a little more gun-shy. That's why we saw back in March and April; things pretty much just went completely dead. And since then, unfortunately, we haven't seen that. I do think, from what we've seen and what we've heard, and based on consumable sales, that we've certainly seen an uptick in procedures, which is great. I'll let Spero comment on why that might be.

Well, I think it's a great question, right. I'm a practicing plastic surgeon. So I could tell you in New York, so I could tell you this much. There's a group of patients who always have this done no matter what, that's an existing pool, that's going to come in, no matter what happens. What's happened differently is we see this reflected by the volume coming in to the different offices across the country, which I'm in touch with, is there's a lot of new patients that never considered plastic surgery, never considered aesthetic medicine for themselves. A lot of self-reflection has found its way into expanding this aesthetic market. So even though we saw, we thought the volume was going to be sort of shifted since usually the volume for plastic surgery, the highest is in the spring, and usually in the fall it sort of tapers off and we saw that push back. And I think to continue, the part with the reason is, is that the market has expanded, and people start to take care of themselves. And I expect that trend to continue. I think that the percentage of new patients is what's fueling this market, and I expect that to continue as things open up, especially if you consider the optimism behind that and the vaccinations.

Yes, it absolutely does. Thank you very much.

You're welcome.

The next question comes from Jeff Johnson with Baird. Please go ahead.

Thank you. Good morning, everyone. I have three questions. First, regarding the guidance for 2021, we're trying to understand the quarterly performance. Although you don't provide quarterly guidance, should we expect the first and possibly second quarters to decrease significantly from the fourth quarter, by around 15% to 20%? Additionally, how do you anticipate the second half of the year will perform against challenging comparisons and strong pent-up demand? Is there a possibility for solid year-over-year growth, or should we adjust our growth expectations for the second half due to these difficulties?

Well, this is Moshe. The first quarter of 2021 as compared to the first quarter of 2020, we'll see a big growth; we will see a big growth. And you always have to compare quarter-over-quarter. You cannot compare Q1 to Q4, Q1 2021 to Q4 2020 just because of the seasonality of our business. But if you compare Q1 2021 and Q1 2020, you'll see a big growth. That's something that we can assure you, even in our budget. Regarding and again as I said before, we still see the effects of the pandemic on Q1 2021 in certain parts of the countries, including in Canada and North America, but also in Europe and other countries. We believe that starting Q2 2021, once most of the world will get the vaccine, or at least we hope so, then we'll see a big momentum start and the numbers for Q2, Q3, and Q4 will surpass of course, the Q2, Q3 and Q4 of 2020. So overall the growth of $55 million or close to $55 million year-over-year will spread over the fourth quarter, and quarter-over-quarter, we believe that we'll see a nice growth between 2021 and 2020. Did I answer your question?

You did, thank you, Moshe. And I guess one follow-up on that, you mentioned does the women's healthcare maybe growing to 8% to 9%. I think you said or maybe 7% to 9% of revenue, that's the number you gave, if I do the quick math, that would suggest we're getting good growth out of that business this year up to maybe $20 million to $25 million contribution from that product versus only about $5 million in 2020. It kind of puts the MIR app or the minimally invasive and the hands-free growing closer to maybe 15% year-over-year for the year, is that just conservatism have we gone through kind of a big bolus of demand for the MI and the hands-free, and now we have to dial our growth expectations down there, just how to kind of think about kind of your comments on the women's healthcare versus what that implies for the other two big platforms?

We always aim to be conservative, especially with our guidance, so we can exceed those expectations, which we believe we've done since becoming a public company. Regarding women's health, we plan to launch a new platform called Empower in the second quarter. Dr. Spero Theodorou discussed the various modalities this platform will include. We are currently conducting clinical studies, and the initial results are promising. We anticipate growth to around 6% to 7% in 2021, though whether that translates to $20 million or $15 million remains to be seen. It's important to remember the FDA's letter from mid-2018, which nearly brought the women's health market to a standstill for all companies selling to the OB/GYN community. We were the only company to respond to that letter and received permission from the FDA to continue selling to this community, which is why we are committed to developing new products for women's health. The OB/GYN and women’s health market is a key growth area for us, and we plan to invest in it, including hiring a specialized sales force, just as we have done for plastic surgery, anesthetics, and other minimally invasive and hands-free products launched over the past two years.

Thank you. I wanted to follow up on some comments Spero made about patient demand. It seems like there is significant pent-up demand in the second half of the year, and both disposable income and the Zoom effect appear to be strong. Is this trend being observed across the U.S.? Specifically, in areas like LA, where there are still considerable shutdowns, and places like Las Vegas, which have historically been major aesthetic markets, is there still pent-up demand anticipated in 2021? Or do you think that even in those markets, you've heard from colleagues that demand has already bounced back significantly? Thanks.

That's a really good question. The largest markets for plastic surgery are traditionally New York, LA, Miami, and Texas. I stay in contact with my colleagues, and the key issue has been the closure of elective procedures, which occurred in March. When elective procedures are closed, operations cannot proceed. However, this has not been the case in California, according to the doctors I speak with. Demand remains strong, and patients are still coming in. I believe there will be pent-up demand in the future, especially in New York and LA, where regulations are very strict, but patients continue to seek services. I anticipate that as the vaccination process progresses, the trend will continue positively. Those who are concerned about getting elective procedures done are likely to feel more confident as we move forward. So, to put it simply, yes, we expect a pent-up demand in those markets. Currently, the existing volume has not been affected; everyone is performing well since elective procedures have not been halted, unlike what happened back in March. Does that answer your question?

It does. Thank you.

You're welcome.

The next question comes from Asaf Barel Chandali with Oppenheimer. Please go ahead.

Thank you for taking our questions and again, congratulations on a very impressive year. I guess maybe if you could just start on the new product launches. Can you walk us through how you're seeing the timing of the launches as we move through 2021, so back half, front half?

Hi Asaf, I'm doing well, thank you. Yes, we plan to launch two products in 2021. The first is Empower for the OB-GYN, which has already received all necessary FDA approvals, and we are now awaiting the clinical study and proof. I believe Spero has some insights into the studies we're conducting. We expect this product to launch in the second quarter. The second product is aimed at the ophthalmology market, specifically for dry eye and some aesthetic procedures for the upper and lower eyelids. This product is likely to launch toward the end of the third quarter, as we are still developing the platform and it is currently in the FDA approval process. We expect to submit for that approval within the next two months. Additionally, we are setting up the production line for this platform, which will be ready to start manufacturing in the second quarter, and we hope to meet that timeline as well.

Okay, that's very helpful. I appreciate it. And maybe I guess on the competitive front and maybe just an opportunity for you guys to comment on it. I think we all appreciate the commentary on the healthy kind of demand for aesthetics broadly. But as we look across the other public medical aesthetics comps, whether it be injectables or cryo or obviously even lasers, we're seeing relative weakness. So if you guys maybe want to kind of take this as an opportunity to comment on how you're seeing not just RS, but specifically your kind of solutions taking share, and what the feedback is from physicians, that would be helpful.

Sure. I will start and then I'll pass it to Spero. Over the past two years, there has indeed been a decrease, which presents an opportunity. I believe we've taken advantage of that opportunity through our actions. In the global market, a lot of competitive challenges have stemmed from consolidation in the industry, with private equity acquiring companies and larger pharmaceutical firms doing the same. Our expertise lies in capital equipment and consumable sectors with minimally invasive solutions that are not widely available. Many of these companies have been absorbed by larger organizations, which leads them to lose focus on their original goals. We've effectively positioned ourselves to benefit from this situation. Spero, do you want to add anything from a patient perspective?

Yes, I think Shak, thank you for saying all that. I think what's important here to understand is that we've identified what we call a treatment gap, that's a concept that we noticed in the market, we found unmet need, and what does that mean? I'll repeat again for people who don't know. So you have two ends of the spectrum, you have the one end of the spectrum; we have major operations, and then you have a lot of these non-invasive procedures, lasers, etc., etc., which are not as effective as they can be. So you have a whole number of patients between 35 and 60, 55, 60 years old, which a) are not bad enough to have a big operation, but they’re also not ready for a facelift. They’ve tried everything else and it hasn't really worked. They're getting there is a fatigue component involved there, right, getting fillers every three months and these lasers. Finally, if they can find a procedure that will essentially tighten their skin, give them a long-lasting result in one 45-minute session, even though it might be a higher price at the end of the day, when you consider the number of continuing treatments over a period of time, financially it makes more sense just to have one procedure done that lasts for eight to 10 years. So there has been a paradigm shift in the way people are looking at these things. And a combination of what Shak mentioned in addition to the fact that people are starting to smarten up their lives. If I’m having filler three times a year, and I’m doing these things, all together it’s easier for me to have something like this, which is permanent and it looks good, it looks great. So the minimally invasive approach to what we're doing is a paradigm shift in aesthetic medicine. That's why you're seeing the growth that you're seeing because we're able to penetrate these offices, but most importantly give the patients what they really need. The doctors are relieved, because they don't have to explain themselves afterwards why this works, it doesn't work. They're like, here you go. Add to the fact that you have the hospitals, and patients are afraid of hospitals. The office-based procedures are where it's at. All these elements are what make us competitive, but also are changing the way the industry has been in the past.

Okay, that’s very helpful.

Hey Asaf, this is Moshe. I believe we talked about this when we met in Israel. I think it's a mistake to compare us to the laser companies. You're familiar with them; I'm sure there are many private companies. However, there are three public ones: Alma, Venus, and Kyocera. When you examine the performance of those three companies in 2020 and compare it to InMode's performance in the same year, the difference becomes clear. 95% of their business depends on one energy source, which is laser energy, and that energy is becoming a commodity technology and product; they no longer have intellectual property protection. Their gross margins sit around 50% to 55%, and they are all losing money or barely breaking even. We have established a new category with minimally invasive surgical procedures; I don't think we have a recognized comparable or peer. We ought to be evaluated based on our own performance rather than being compared to other companies, since most of the laser companies are struggling right now. The market is saturated, there is overcapacity, and system prices are declining. You can purchase the best laser today for less than $60,000 and a quality IPL from Korea for $30,000 or $35,000. At those price points, they cannot remain profitable. The company’s strategy and core philosophy focus on developing products that offer intellectual property protection and uniqueness. This is why this category was created.

Okay, great. And just last question on my end, once again, exceptionally strong growth in the International business. Can you give us; you guys helped us out last quarter, giving us some color on some of the underlying countries? I mean, I guess maybe most interesting to be any commentary we can get on how things are developing in China. Anything that you guys think is relevant?

Okay, okay, I'll give you that. Let's divide the answer into three parts. Currently, we have five outside North America, and I'm not including Canada; we have five fully-owned subsidiaries: UK, France, Spain, Australia, and India, all the rest we're selling through distributors. By the way, just to give you some idea, 85% of our sales is direct, North America and those five subsidiaries, all the rest we sell through distributors. In 2020, we built the company in France. We hired more direct people into other subsidiaries, we changed several distributors. But most importantly, we have received regulatory approvals in China, in Australia, in Korea, and also in Brazil. These are major countries that actually drive the growth in the International market. We continue to invest heavily on regulatory bodies, with regulatory processes in many countries. Don't forget we have to deal with 27 countries, 27 languages, and 27 different submissions. This is not everything the FDA will see in Europe. We continue to do it because we believe once all of our portfolio will be approved and cleared in those countries, it will drive the growth. We work on three basic avenues. One, to enhance the distribution in certain countries like we did in Italy and Germany; to enhance our position with all of our subsidiaries in those countries where we go direct; and continue to invest in regulatory processes to get all of our portfolio approved by most of the regulatory bodies around the world. These are something that we're doing parallel, and this is the reason why in 2020, the rest of the world grew more than 70% compared to 2019. I believe that this process will continue in 2021.

This concludes our question-and-answer session. I would now like to turn the conference back over to Moshe Mizrahy for any closing remarks.

Okay, thank you everybody for joining us today. We hope that 2021 will continue the momentum that we have seen in the third and fourth quarters. We will do our best to meet the guidance or do even better than the guidance, come up with a new product and create value for the shareholders. Thank you everybody.

This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.