InMode (INMD) Q2 2023 Earnings Call Transcript

InMode (INMD 0.70%)
Q2 2023 Earnings Call
Jul 27, 2023, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the InMode second-quarter 2023 earnings results conference call. [Operator instructions] Please note this event is being recorded. I'd now like to turn the call over to Miri Segal of MS-IR. Please go ahead.

Miri Segal -- Investor Relations

Thank you, operator, and to everyone for joining us today. Welcome to InMode's second-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 go to 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 -- Chairman and Chief Executive Officer

Thank you, Miri, and 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 our prepared remarks, we will be available to answer your question. We're happy to report a record quarter on all fronts. We announced record revenue of $136.1 million, an increase of 20% compared to the second quarter of 2022. Sales from our platforms reached over 1,600 units, and the number of disposable sold totaled over 270,000, the most in our company history.

As part of our ongoing global expansion, during the second quarter, we established two new subsidiaries, one in Japan and one in Germany. Establishing subsidiaries in countries where we believe we should be selling directly and not through distributor is our philosophy and strategy. Currently, InMode is one of the only companies in the space where its founders still actively involved in the management and the ownership, and I believe that our strong involvement and commitment is part of InMode DNA. InMode innovation supports our growth and leads to a solid brand recognition within a highly competitive aesthetic industry.

To further secure our competitive advantage in the next 12 months, we intend to invest heavily on product development and to launch a new minimal invasive technology and platform, upgraded Morpheus8 technology with new features, a new handsfree family of platforms for face and body, and a new multi-application -- applicator platforms with new technologies. In addition, we plan to secure additional indication cleared by the FDA. There are currently eight FDA studies in process. Within the next 12 months, InMode portfolio of platforms and indication will be completely new and upgraded and we will continue aggressively enhance and protect our IP and patent.

Lastly, we are happy to report that just last month, InMode become part of the Russell 2000 Index. This index is most widely quoted measure of the overall performance of small-cap and mid-cap stock. Now, I'd like to turn the call to Shakil, our president in North America. Shakil?

Shakil Lakhani -- President, North America

Thanks, Moshe, and everyone for joining us. We are happy to report a record second quarter, while also seeing significant growth in consumable sales. Revenue from consumables and service reached nearly 44% year-over-year growth. This is a strong indication that our platforms are being used more frequently, signifying continued demand and increased brand recognition.

In vision, our non-surgical ophthalmic platform is gaining significant traction in North America. We plan to continue hiring product-specific sales reps to expand penetration into the ophthalmology market. Morpheus8 continues to be our leading technology. Overall the branding, patient demand, and excellent results put this product in a class of its own.

Lastly, I'd like to thank our entire North American team for their continued hard work. I will now hand over the call to Yair for a review of the financial results in more detail. Yair?

Yair Malca -- Chief Financial Officer

Thanks, Shakil, and hello, everyone. Thanks again for joining us. InMode generated a record revenue of $136.1 million in the second quarter of 2023, representing a 20% year-over-year increase with a gross margin of 84% on a GAAP basis. Second-quarter sales outside of the U.S.

accounted for $49.5 million, compared to $41.2 million in Q2 last year. We continue to see growth coming from different regions around the world, and in Q2, sales from Asia hit a new record. To support our operations and growth, InMode now operates in a total of 92 countries with a sales team of more than 264 direct sales reps and 81 distributors worldwide. Capital equipment in the second quarter represented 84% of total revenue, while consumables and service revenues accounted for the remaining 16%.

Sales and marketing expenses increased to $51.1 million in the second quarter, compared to $39.7 million in the same period last year. This increase is attributed to the addition of new sales representatives, as well as investment in direct-to-consumer advertising campaigns and hosting in-person events to support the company growth projection. Service compensation accounted for $6.5 million in the second quarter of 2023, a slight increase compared to $6.4 million in the second quarter of 2022. GAAP operating expenses in the second quarter were $57 million, a 26% increase year over year.

On a non-GAAP basis, operating expenses were $51.1 million in the second quarter, compared to a total of $39.5 million in the same quarter of 2022, representing a 29% increase. GAAP operating margin for the second quarter of 2023 was 42%, compared to an operating margin of 43% in the second quarter of 2022. Non-GAAP operating margin for the second quarter of 2023 was 47%, compared to 49% for the second quarter of 2022. GAAP diluted earnings per share for the second quarter were $0.65, compared to $0.52 per diluted share in Q2 of 2022.

Non-GAAP diluted earnings per share for this quarter were a record $0.72, compared to $0.59 per diluted share in the second quarter of 2022. Once again, we ended the quarter with a strong balance sheet. As of June 30th, 2023, the company had cash and cash equivalents, marketable securities, and deposits of $629.4 million. Before I turn the call back to Moshe to take your questions, I'd like to reiterate our increased guidance for 2023.

Revenue between $530 million and $540 million, non-GAAP gross margin between 83% and 85%, non-GAAP income from operations between $238 million and $243 million, non-GAAP earnings per diluted share between $2.62 and $2.66. I will now turn over the call back to Moshe.

Moshe Mizrahy -- Chairman and Chief Executive Officer

Thank you. Thank you, Yair. Thank you, Shakil, and thanks to all of our employees around the world. I'm sure that most of them and some of them are listening to us today.

It's important. Operator, we're ready for Q&A session.

Questions & Answers:

Operator

[Operator instructions] The first question is from Matt Taylor with Jefferies. Please go ahead.

Mike Cohen -- Jefferies -- Analyst

Good morning. This is Mike Cohen on for Matt. Thanks for taking my questions, and congrats on a nice quarter. Just first wanted to start with -- you continue to have very strong growth in consumables.

Can you just talk about how you view the sustainability of that demand, particularly in the event of any macroeconomic headwinds, and maybe comment on what you're seeing so far through July?

Moshe Mizrahy -- Chairman and Chief Executive Officer

Hi, Matt. This is Moshe. As far as consumables and the use of consumables, the beginning of this quarter looks strong, although I have to say that we have seasonality in our business, and people sometimes do not like to do a static procedure in the summertime. They do it before the summertime, and this is why Q2 was very strong as far as usage of disposable, which means more procedures were done.

But as of now, almost the end of the month of July, we don't see a slowdown. We see it continue to grow. That means that the doctors are still promoting the minimally invasive and the ablative, the Morpheus, very strongly, and it also depends on the numbers of Morpheus and minimally invasive systems that we sell, which is growing as well. So we might have a nice number in Q3, but I can assure you that Q4 will be much higher than what we see today.

Mike Cohen -- Jefferies -- Analyst

Got it. Thank you. Thank you. Talking about the number of systems you sell, I was hoping you can also give us an update on how the capital equipment environment is holding up, maybe just comment on what you're seeing in terms of trends in demand, and do you see any changes on the margins in terms of doctors' ability to finance these systems, particularly as rates continue to increase?

Moshe Mizrahy -- Chairman and Chief Executive Officer

OK. I will ask Shak to answer for North America, and then I will add some on. Shak, please.

Shakil Lakhani -- President, North America

Hey. Good morning, Mike. So we've definitely seen industrywide that rates obviously have increased. We haven't seen much of an impact on demand, which is good, but we've gotten a little creative in terms of getting a couple of other sources.

We try to get ahead of the game. We've seen this happen every four or five years. Something tends to come up like this, but it's how do we navigate around it. So we definitely have looked at some other sources, which has not slowed things down dramatically, but things are a little -- a lot of the financing companies are looking for a little more information, things that we wouldn't have done in the past, but we've already implemented a process so that we could kind of keep the ship smoothly sailing.

So with that being said, I'll hand it over to Moshe, but from our perspective in North America, we've definitely seen some things, but we've been able to adapt to the environment.

Moshe Mizrahy -- Chairman and Chief Executive Officer

OK. In OW, the numbers of doctors who buy a system with the lease package is not as high as in the United States. But what we managed to do from the beginning of the year, we have one bank in Europe who is now working with country by country in order to put together a lease package plan for each country. We started with Spain, and we're going to Italy and to all of our subsidiaries, and we might have some of our distributors as well.

So, OW grew this quarter 21% compared to the second quarter in 2022. And I believe that financing is still an issue, especially with the high-interest rate, but we manage very well.

Mike Cohen -- Jefferies -- Analyst

OK. Great. Thank you so much for taking my questions.

Operator

The next question is from Matt Miksic with Barclays. Please go ahead.

Matt Miksic -- Barclays -- Analyst

Great. Thanks for taking the question. Can you hear me OK?

Moshe Mizrahy -- Chairman and Chief Executive Officer

Yes.

Matt Miksic -- Barclays -- Analyst

Terrific. So a couple of questions, if I could. So the first to follow up on sort of the current tone of the market, but more specifically kind of the seasonal cadence for the back half in terms of system sales. If you can maybe give us any sense of whether, the strength in Q2 eases here in Q3 and rallies in Q4, or any color, either regionally or across your different systems that you could provide, as well as on some of the spending and investment that you're making in ophthalmology, for example, and sort of entering new specialty areas.

Is that -- not talking about 2024 in detail, I'm sure, but should we expect those spending levels to continue through year-end and into 2024 or any color you can provide on that? And I have one quick follow-up if I could.

Moshe Mizrahy -- Chairman and Chief Executive Officer

Yeah. Well, the medical aesthetic and aesthetic surgical industry has some seasonality. Although in 2021 and 2020, just because the COVID, we did not see the same seasonality. For example, in 2020, the Q2 was a very tough quarter because of the COVID and we didn't do well.

But everything, when we start, when the market opened in Q3, which is relatively should be a summer time, which is slower, we saw, a big jump. And the same in 2020 -- 2022, just because of the COVID, we did not experience the same seasonality. And that's something we need to say. But overall, in 2023, I believe the seasonality will come back.

And the seasonality in medical aesthetic is Q1 is usually softer, soft Q. Q2 is relatively strong. Q3, because of the summer, Europe and also the United States, Europe and the United States is a little bit slower; although Asia and Latin America are not experiencing exactly the same seasonality. For them, Q3 is relatively strong.

And Q4 is a strong quarter for everywhere, all the territories. In 2020 and 2021, we experienced increase compared to Q2 in the revenue. We don't have enough information to judge right now what will happen in Q3, 2023 worldwide. From what we see, we started very nicely with all the territories.

What will happen in the month of August, which is usually the tougher month is yet to see. Now, Shakil, do you want to add something on North America?

Shakil Lakhani -- President, North America

Yeah. Sure. So as Moshe was saying, Q3 typically once we clear out our funnels, the first couple of weeks of July and the first, basically the first two to four weeks of July are spent starting to build back up the pipeline. So with that being said, as Moshe mentioned, it's a little hard for us to give you any indication of how things are going.

This is what we've -- many of us on the management team have experienced for over 15, 20 years in the industry. So we're kind of used to it, but you just like as Moshe said with COVID, we didn't know what to expect in Q3 was stronger than Q2, which I don't think has really happened in many places. But we feel like the demand overall, at least in North America is stronger than ever. As I mentioned before, the product and brand awareness is definitely helping.

And, you'd ask the question in terms of envision and continuing to spend, Moshe doesn't like using the word spend. He likes using the word investing and makes improvements.to spend. Moche doesn't like using the word spend, he likes using the word investing, it makes him feel better. But with that being said, we're definitely going to invest in that market and as I mentioned earlier, in hiring new talent as well, but also penetrating more of those specific to that vertical itself.

Does that make sense?

Matt Miksic -- Barclays -- Analyst

Yeah. Yeah. No, that's helpful. And just, it sounds like we should expect those things to kind of continue behind those businesses into 2024, understanding that you're not giving in...

Moshe Mizrahy -- Chairman and Chief Executive Officer

Absolutely. Absolutely. Don't forget that the ophthalmology platforms were introduced in Canada, and now soft launch in the U.S., but we have not started in ROW, not in the other territories, we're waiting.

Matt Miksic -- Barclays -- Analyst

Got it. Super helpful. And the follow-up just is on, you've talked before about the competitive environment. Would love to get your an update as to sort of what you're seeing, what you expect to see, if there's demand, are you having to sort of fight for it any more or less than you did a year or two ago, any color you share there would be helpful.

Moshe Mizrahy -- Chairman and Chief Executive Officer

Shakil, I believe you should answer that.

Shakil Lakhani -- President, North America

Yeah, Moshe, I'm not sure. I think he has a connection problem, so I'll handle that. In terms of competition, yeah, in terms of competition, yeah, I wouldn't say it was ever easy or I don't think it will ever be easy. And if that ever happens, I'm sure we'll all be pretty happy about that.

But, we've definitely, as I mentioned, in terms of us investing in brand awareness, things like that, it's made it a little easier, I would say. And a lot of the competitors, they're going to have different strategies and everyone's going to continue to sell competition breeds awareness. So we're of the philosophy that if everyone's doing well in our business, it's better for everybody, rather than taking a different approach trying to take down a giant, which a lot of the competitors try to do. But that's just -- that's not how we approach things.

So from our perspective, the better the industry does, the better it is and we feel like consumer demand, but also coupled with position demand for the need to actually incorporate some of these technologies into their practices, for additional revenue, income, so on and so forth, is going to continue driving this business and, it's on us to continue innovating and providing them with the appropriate tools and technology so that they're able to do that and that's going to differentiate things. We have a user meeting coming up in August in Chicago, and I think we have over 600 practices signed up every year. It's great. We try to give them the ammunition that they need as part of their practices, along with our post-sale support team who've done an incredible job.

So our goal is, we try to equip our people with what they, our customers with what they need from a technology perspective, but also from a marketing perspective and how to help them be successful. We try our best at it. At least we can't guarantee anything. But, as far as the competitive landscape goes, I think it's pretty strong right now demand-wise.

I don't know if some of our competitors have made some of the changes that they may have needed to in terms of financing and how to handle that. But, we're a few steps ahead, I believe.

Operator

The next question is from Caitlin Cronin with Canaccord Genuity. Please go ahead.

Caitlin Cronin -- Canaccord Genuity -- Analyst

Hi, everyone. This is Caitlyn on for Kyla Rose and congrats on a great quarter. Just a couple of questions. Starting with Empower, how's the continued launch going and any updates to expectations? And have you begun hiring any Empower-specific reps? And where are we from like an OUS launch and approval standpoint on that? And I have a follow-up.

Moshe Mizrahy -- Chairman and Chief Executive Officer

OK. Well, I believe the Empower is growing. The Empower sales is growing. We will not release numbers exactly because it's now we're not yet ready to do it.

But we see some growth on the Empower platform as well. Regarding the indication for SUI, we have a discussion with the FDA on the protocol. They asked us to do some additional proof of concept study, which we're doing right now in Columbia. We will come back to them with the results to finalize the protocol, hopefully before the end of the year.

And then we will file an IRB to do the study in the United States, with of course approval of the FDA we will conduct the study. So I believe we should not see -- we will not see any clearance before some time to the end of 2024, but we do have clearance on the Viton for all kind of women health indication on the platforms and currently we are marketing the platforms with those indication. In addition, we are developing additional handpiece for the empower, which again now we are doing some proof of concept study after that we will do a study approved by the FDA. This is a little bit longer process with women health but we are spending a lot of money and investing in this technology.

Shakil Lakhani -- President, North America

And Caitlin just to add to that to what Moshe was saying, the one thing that we have noticed is that a lot of the competitors have and we've talked about this in the past but they've kind of drawn out of the market and so we do see this is a nice little opening where we're trying to capitalize on that but again doing it the right way as Moshe had mentioned.

Caitlin Cronin -- Canaccord Genuity -- Analyst

Awesome. And then just a quick question on evoke, to you want the next generation of the product yet? Thank you.

Moshe Mizrahy -- Chairman and Chief Executive Officer

Yeah. We developed the next generation with additional power and additional I would say energy, different energy. It's not yet on the market. We are now finalizing the last I would say fine tune of the product.

Hopefully, it will go to production this quarter and we probably will launch it some time to the end of the year.

Operator

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

Jeff Johnson -- Robert W. Baird and Company -- Analyst

Thank you so much, guys. Just maybe if I could take through two or three quick ones here. The International Unit sales at 966 number was definitely a strong number. Anything in there one time in nature you went direct and it sounds like Japan and I think you said one other market that I wrote down that I could now, but was that had -- did that have any stock in order to it, were there any new distributors that had stock in or that 966 a clean number and if it is, we tend to take a fourth quarter being the peak every year should we think that you could still sell more than 966 units as we get into the fourth quarter of this year again a strong number here in the second quarter?

Moshe Mizrahy -- Chairman and Chief Executive Officer

Well the international is not one market. On the International market there are 27 languages and more than 27 regulatory bodies that we need to deal with and some claim on one country are not applicable to another country and some products need to do some modification because of regulatory issue. So the dealing with -- dealing with the international market is country by country, territory by territory. We're currently heavily investing in Asia with a lot of marketing activity and a lot of training and this is the reason why we open subsidiary in Japan because we believe Japan should be a good market for us.

It's usually a good market for medical aesthetic and our distributor in Japan they did well but not as -- not according to our expectation. So Japan would be another country -- in addition China, China is opening up again and as you know we have a company in China in Guangzhou which we have established before the COVID, but we did not operate it because of the COVID, nobody could have gone and visited China. So now we are considering to see how we can go direct in addition to what we do with distributors because in China you cannot use only one way of distribution. It's a very complicated country, depends on the territory.

Even in China you need to know five different languages and five different operating manners, but we're going closely. Latin America, again we are investing in all the countries. This year we would have the first use of meeting in Latin America in San Paulo in October 500 doctors, which is very important. We're covering all the country right now, nine countries in Latin America.

We signed the last contract a month ago and we're working on regulation again, country by country, because the regulation in Brazil, which is in visa, is not the same regulation in Colombia. And you have to deal with each regulatory organization or regulatory body by itself. In Europe, as I said in my speech, we just established a subsidiary in Germany and we intend to start operating the subsidiary sometime in the fourth quarter. We hired a managing director there and hopefully, we will start interviewing some direct salespeople.

By the way, when we go direct, sometimes we don't sell more systems, but we recognize twice as much dollars, because when you go direct, you recognize the full value and not the transfer price and that's important. And also important, when you go direct, you feel the market, you talk with the doctor, you know what they want, what are their unmet needs, and it's easier. So I'm not suggesting that we will go, we're selling in 92 countries, we will go direct in 92 countries. In certain countries, we have a distributor that is doing a good job.

In the future, we might offer them to become partner, 51%, so we can work together. But slowly and gradually, we are improving our position in Latin America, Europe, and Asia.

Shakil Lakhani -- President, North America

I would like to add that it usually takes some time from the moment we open a subsidiary until the moment we start to see a significant contribution. So to answer your question, Jeff, there was no one-time in the international market or at all in Q2. It was all normal course of business.

Jeff Johnson -- Robert W. Baird and Company -- Analyst

Of course. Good. Yeah, no, that's helpful, both of you. Thank you.

Again, a very solid number. So congrats on that. And then, I don't know if Spiro was able to reconnect or Dr. Crandall, maybe this is for you, I'm not sure.

But I just want to make sure I'm understanding the women's healthcare strategy here. I feel like my understanding has gone back and forth a couple different times on this. I thought when we spoke in Miami just a month or two ago, the focus was going to remain primarily on kind of cash pay women's healthcare on the non-reimbursed side. I know you've got now this proof of concept study going on, SUI, you obviously acquired the by these patents.

One, I guess, Yair, for you, can we stay some 3% R&D as a percentage of revenue if we go into these more formalized, maybe bigger clinical trials? Is that $3.5, $4 million a quarter still the right run rate for R&D spend as we get into 2024, but more importantly, are you going to pursue some of these may be costlier, I don't know if they're higher risk, but at least more reimbursed side of women's healthcare indications? Or is the focus primarily going to stay on kind of that rejuvenation, wellness, the non-reimbursed cash pay side of women's healthcare? Thanks.

Moshe Mizrahy -- Chairman and Chief Executive Officer

Well, I will answer that. I will answer that. This is Moshe. Definitely, we want to go to some indication that we can use reimbursement.

But it's a process. The reason why we're doing, we're trying to do, but it's a long process to get FDA approval for you and Incontinence. When all the companies until now failed, including Viviv, after $250 million of spending, they bankrupt and we are buying, we just bought their IP. The reason why we're doing it is because this is the first stage toward getting a reimbursement code.

In order to get a reimbursement code, you need to be FDA-approved. You need to wait, you need to publish five studies, five independent studies, and you need to go and negotiate with the insurance companies. We're in the early stage of that, but that's one of our, I would say, strategic goal long-term.

Jeff Johnson -- Robert W. Baird and Company -- Analyst

Moshe, just to follow up there, the $250 million that Viviv spent, I mean, again, you're spending, I don't have your model in front of me, but like $15 million a year on R&D. Is there a number that has to be a heck of a lot bigger than $15 million, even if it's not 250 to go after SUI, or can this be done somewhere in that low to mid-single-digit percentage of revenue for R&D spend over the next few years?

Moshe Mizrahy -- Chairman and Chief Executive Officer

We do not save money on R&D. We do not save money on R&D. We spend as much as needed. Hiring another 25 engineers will not give us more productivity.

We have a great engineering team in Israel covering electronic engineering, software engineering, clinical engineering, mechanical engineering, regulation, etcetera and, you can judge by yourself. In the last two years, we have launched to the market more than the entire industry altogether and we're coming with two platforms every year and as I stated in my speech in the next 12 months, we will come up with four new technologies on existing technologies upgrade or some new. And we will continue to do it. I do not understand why people measuring R&D by spending or percentage of sales.

That's not the right measurement. The measurement of R&D should be on the productivity of R&D. And I think that the aim on the profit itself in the last I would say four, five years, coming to the market with the best product, we did not fail even with one of them in the market successfully without indeed that we have. So just to say, please increase your R&D from 3% of revenue to 7% of revenue will not make it different.

It will create some kind of a mess. We know how to manage R&D. It's done in Israel. I believe we have the best R&D team in this industry worldwide, worldwide.

And the profit in the pudding, look at the products that were coming with every year, look at the success of them, look how a people are happy with them. For example, fortune are our wealth, both use, for years in the market, 270,000 disposable in the last quarter. It will not happen unless you have good R&D team productive and the definition of what do you want to develop is right. I mean not just develop something.

I'm looking on our competitors. And I see that the new products that they claim to the market, some of them are buying products from Korea just give it the new name and bring it to the United States. And some of them are repackaging all technologies in a nice box as a new product. We are coming with new indication, year over year, either a platform, a handpiece, a combination, etcetera and that's the competitive advantage of InMode.

Jeff Johnson -- Robert W. Baird and Company -- Analyst

Understood, Moshe. I don't mean to get you on your soapbox and that is a critique. I'm trying to understand where R&D is going long term and then how you can continue to innovate at these levels. And so it's more understanding that and a plotting that not critiquing that, but thank you for coming.

Moshe Mizrahy -- Chairman and Chief Executive Officer

One more thing I wanted to tell you on this is coming with new products to the market, you need to take into consideration your existing portfolio. You don't want to cannibalize it too fast. So it all depend what do you bring and what kind of new indication or new procedure, how it will be in the full portfolio system. There's a lot of issues to be discussed and decide before we define what product you want to develop.

Shakil Lakhani -- President, North America

Let me add some color here. It's Shak. Obviously, you can tell that the Moshe's got a lot of passion for this and he's engineer by trade and so what he's saying essentially is that we'll do what we need to do in order to get what we need to get. However, the measure, as he mentioned, shouldn't be from how much we're going to spend.

It's more about what are we going to do? What do we need to do? I think there's a lot of companies that get into this and there's a reason that we were able to scoop up some of the IP from there will be right because they're no longer here. But I think for us, we've always been about saying power and longevity and so our engineering team is obviously strong, but we're not going to just multiply spending. I try to warn you guys that most of you have a problem with the word spending versus investing. Most of you will wholeheartedly invest when something makes sense.

That's what we plan on doing in the women's health and wellness market.

Operator

The next question is from Matt, excuse me, Mike Matson with Needham and Company. Please go ahead.

Mike Matson -- Needham and Company -- Analyst

Yeah. Thanks. Just on envision, I think you talked about the dry ISEA clearance coming in the third quarter. Can you just give us an update on that and how important is you driving sales in Envision?

Moshe Mizrahy -- Chairman and Chief Executive Officer

Well, you're right. We thought that we will start the study on the third quarter. I hope it would be. We're in a very loud stage of the FDA approval of the protocol.

We had, we did a pre-submission to the FDA with where we suggested this is the protocol. We had a long Zoom call with all the team in the FDA-ophthalmology department. We agreed on few things. They asked us to send a second version of the protocol, which were preparing right now.

And, hopefully, by the end of this month, it will be filed with them and then, doing an IOP. So, sometime in the middle of this quarter, we already have the doctor that will do the study. Pilot study was done in Israel and other countries. We know that we know that it is working and we'll take it from there.

And once we finished the study, we will submit to the FDA, hopefully, before the end of the year.

Mike Matson -- Needham and Company -- Analyst

OK. Got it. And, do you think that that's an important feature to the ophthalmologist when they're considering whether or not to buy the product? Are they willing to buy it now with the knowledge that that's going to happen at some point in the six to 12-month period or something?

Shakil Lakhani -- President, North America

So what we've typically seen in the past with all of these technologies, not even just specific to the ophthalmology community, is that if you have physicians who are getting good results, they have apathy patients, and they're generating some good revenue from it, they do the selling for us. And it's just simply because they believe in it. They're doing well and as long as they're getting the results, which we are seeing 100%, they will do the job for us. So seeing that it's a little earlier, we do anticipate continuing some of the revenue growth and using it as a driver obviously here.

But that's kind of the most important thing when you think about this is, OK, if we do launch something before, study like that that we were talking about, we're in the process of working and getting going. Do we have those other check marks, that we can put into place and as of this point, when I only see it getting better, we do.

Moshe Mizrahy -- Chairman and Chief Executive Officer

One more thing I wanted to add here, which is important, and at the end of the day we're in a static company. So, every platform, including envision, will have some handpieces to do aesthetic. So, the ophthalmologist can do periobital wrinkles with more views. You can do skin tightening or full rejuvenation, which are approved indication by the FDA.

So for him, he has one modality to do dry eye, and two or three more modalities on the same platform to get more money from the customers, private money on, skin rejuvenation, full of face rejuvenation, periobital wrinkles etcetera. And the end of the day, it's a money machine.

Mike Matson -- Needham and Company -- Analyst

Yeah. OK, I understand. And then just one of the things he called out in terms of increased sales marketing spending was DTC, how did you see a campaign, I guess. So can you maybe just talk about that kind of where you're sending? Is it kind of social media, is it, so liberty, endorsement is it, I don't think you're doing the TV advertising, but maybe I missed that.

Moshe Mizrahy -- Chairman and Chief Executive Officer

Everywhere, everywhere. All the way from Billboard to social media, websites, B2B, B2C meetings with doctors, seminars, conferences, doctor conferences, study publications, everything.

Mike Matson -- Needham and Company -- Analyst

No TV advertising.

Shakil Lakhani -- President, North America

We typically choose to diversify what we do these things, and then we get a metric based on where we try and attempt to track what's being successful and where money is not being spent the right way, and then we double down in areas where we're seeing a good return.

Moshe Mizrahy -- Chairman and Chief Executive Officer

And we do have random back to those ones

Mike Matson -- Needham and Company -- Analyst

All right. OK.

Operator

The next question is from Ryan Barocas with SVB Securities. Please go ahead.

Ryan Barocas -- SVB Securities -- Analyst

Hey. This is Ryan Barocas from UBS on for Danielle today. Thanks for taking our questions. So first one from us here is on capital allocation.

So congrats on the recent acquisitions of IV patents. Just wanted to get an update on your capital allocation priorities as a whole. Is your appetite still as high as it's been in recent quarters despite these patent acquisitions and can we expect more IP and smaller type deals or is it still possible? We see a larger size deal in the near future.

Moshe Mizrahy -- Chairman and Chief Executive Officer

Well, I would say two things. One, if the opportunity will present itself to buy more IP which relates to our business and enhance our IP portfolio position, we will do it. We did one license with the University of California on something which also relate to women health. We bought the entire portfolio of [Inaudible] not for big money.

So, it's not something that we need tens of million of dollars. We will not -- we will not spend that kind. Now regarding capital allocation, we are exploring all the time M&A opportunities. We are currently working with few banks.

None of them exclusive, none of them exclusive. We open it to every bank who can come up with something. We do a quick check and if something looks OK to us, we will we will continue to search and explore and do some diligence. I cannot report on something that will happen in the next month or two, but this is the plan.

Ryan Barocas -- SVB Securities -- Analyst

Great. Thanks, Moshe, and then one last one for me on the capital environment and potential upgrades for new technology for your customers. So we've heard from other capital-intensive companies highlight a higher mix of leasing as a percent of their system placements. Just curious if you're seeing the same dynamic and then with the new technologies for your customers on these leasing arrangements, are there technology obsolescence clauses that would allow customers to upgrade to your new technology over the next 12 months? Or would this just be a simple software update on existing systems in the field for customers to access this new technology? Thanks so much.

Yair Malca -- Chief Financial Officer

Sure. So, we haven't, as far as the environment goes, I touched on that earlier from the leasing perspective, that nothing's really changed in terms of what percentage is financed or leasing companies versus, cash deals, so on and so forth. It's pretty much status quo. So hopefully that handles that better for you.

But when it comes down to the actual leasing side of things, your average lease is about five years on average. And so by that time, because, as Moshe had mentioned earlier, we introduced, we're trying to introduce at least two platforms or upgrades to the market every year. We're well ahead of that. In terms of devices that position currently own or currently leased, we've actually been the one company that, at least to my knowledge, that's gone in and several times we've provided certain upgrades for software at no cost, things like that.

If there's hardware, we might have a certain cost to it, but we're very fairly priced, I believe, based on the history of this market. So from that perspective, when you look at the leasing side of things, these, thankfully, the way that [Inaudible] and his engineering team design these things, they're pretty stable. So, at least from a service standpoint, it's not an issue, but in terms of obsolescence, there's always a way for us to upgrade or add on. But as I mentioned, by the time a physician is done with their five-year lease, they're ready to move on to another piece of technology.

And our goal is to obviously, as I mentioned earlier, provide them with the tools and new technologies and innovations that they can actually add into their practices to better their treatment outcomes and revenue results from these devices. Does that make sense?

Ryan Barocas -- SVB Securities -- Analyst

Yeah. Great. Thanks so much.

Operator

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

Moshe Mizrahy -- Chairman and Chief Executive Officer

Thank you, operator. Thanks to all the team that were with me in this call. I want to thank again to all of our employees and their families around the world. I want to thank all of our shareholders.

Some of them have been with us for many years. We really appreciate that. I want to thank all of our suppliers, subcontractors, and everybody that work with us that bring us to this to this success. Without them we cannot do it.

Hopefully, we'll see all of you in the next earning call. Thank you and goodbye.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Miri Segal -- Investor Relations

Moshe Mizrahy -- Chairman and Chief Executive Officer

Shakil Lakhani -- President, North America

Yair Malca -- Chief Financial Officer

Mike Cohen -- Jefferies -- Analyst

Matt Miksic -- Barclays -- Analyst

Caitlin Cronin -- Canaccord Genuity -- Analyst

Jeff Johnson -- Robert W. Baird and Company -- Analyst

Mike Matson -- Needham and Company -- Analyst

Ryan Barocas -- SVB Securities -- Analyst

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