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DOMA Perpetual Sends Letter Urging Board of Directors of InMode Ltd. to Immediately Execute Tender Offer followed by Share Buyback

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DOMA Perpetual Capital Management, a major InMode (NYSE: INMD) shareholder, has sent a letter to the company's Board urging immediate action to enhance shareholder value. The letter criticizes InMode's current stock price of around $16 and highlights the company's substantial cash position of approximately $640 million with no debt.

DOMA demands a 30% tender offer in Q1 2025, followed by a 10% share buyback later in 2025. The investor estimates InMode will generate about $150 million in free cash flow in 2025. The letter also criticizes recent management decisions, including the firing of key executives and lack of production diversification outside Israel.

DOMA proposes several actions including reducing cash levels to below $100 million, establishing a small dividend program, and implementing strategic capital allocation. The investor has retained legal counsel and threatens further action if the Board fails to respond appropriately.

DOMA Perpetual Capital Management, un importante azionista di InMode (NYSE: INMD), ha inviato una lettera al Consiglio di amministrazione della società chiedendo un'azione immediata per aumentare il valore per gli azionisti. La lettera critica l'attuale prezzo delle azioni di InMode, che si aggira attorno ai $16, e mette in evidenza la sostanziale posizione di cassa dell'azienda, pari a circa $640 milioni, senza debiti.

DOMA richiede un offerta pubblica di acquisto del 30% nel primo trimestre del 2025, seguita da un riacquisto del 10% delle azioni più avanti nel 2025. L'investitore stima che InMode genererà circa $150 milioni di flusso di cassa libero nel 2025. La lettera critica anche le recenti decisioni del management, incluso il licenziamento di dirigenti chiave e la mancanza di diversificazione della produzione al di fuori di Israele.

DOMA propone diverse azioni tra cui ridurre i livelli di liquidità al di sotto dei $100 milioni, istituire un piccolo programma di dividendi e implementare un'allocazione strategica del capitale. L'investitore ha assunto un legale e minaccia ulteriori azioni se il Consiglio non risponde in modo adeguato.

DOMA Perpetual Capital Management, un importante accionista de InMode (NYSE: INMD), ha enviado una carta a la Junta Directiva de la compañía instando a tomar medidas inmediatas para aumentar el valor para los accionistas. La carta critica el precio actual de las acciones de InMode, que ronda los $16, y destaca la sustancial posición de efectivo de la empresa, que asciende a aproximadamente $640 millones sin deudas.

DOMA exige una oferta pública de adquisición del 30% en el primer trimestre de 2025, seguida de una recompra del 10% de las acciones más adelante en 2025. El inversor estima que InMode generará alrededor de $150 millones en flujo de caja libre en 2025. La carta también critica las recientes decisiones de la gerencia, incluyendo el despido de ejecutivos clave y la falta de diversificación de la producción fuera de Israel.

DOMA propone varias acciones, incluyendo reducir los niveles de efectivo por debajo de $100 millones, establecer un pequeño programa de dividendos e implementar una asignación estratégica de capital. El inversor ha contratado un abogado y amenaza con acciones adicionales si la Junta no responde de manera adecuada.

DOMA Perpetual Capital Management, InMode(NYSE: INMD)의 주요 주주,는 주주 가치를 높이기 위한 즉각적인 조치를 촉구하는 서한을 회사 이사회에 보냈습니다. 이 서한은 InMode의 현재 주가가 약 $16이며, 약 $6억 4천만의 부채 없는 상당한 현금 보유 고지를 강조합니다.

DOMA는 2025년 1분기에 30% 공개 매수를 요구하며, 그 후 2025년에 10% 자사주 매입을 제안하고 있습니다. 투자자는 InMode가 2025년에 약 $1억 5천만의 자유 현금 흐름을 생성할 것으로 예상하고 있습니다. 이 서한은 또한 핵심 임원 해고 및 이스라엘 이외의 생산 다양화 부족을 포함한 최근 경영 결정들을 비판합니다.

DOMA는 현금 보유량을 $1억 이하로 줄이고, 소규모 배당 프로그램을 설립하며, 전략적 자본 할당을 시행하는 등의 여러 조치를 제안합니다. 투자자는 법률 자문을 retained하고 있으며, 이사회가 적절한 대응을 하지 않을 경우 추가 조치를 취할 것이라고 위협하고 있습니다.

DOMA Perpetual Capital Management, un actionnaire majeur d'InMode (NYSE: INMD), a envoyé une lettre au conseil d'administration de l'entreprise pour demander une action immédiate visant à augmenter la valeur pour les actionnaires. La lettre critique le prix actuel de l'action d'InMode, qui tourne autour de 16 $, et met en avant la position de trésorerie substantielle de l'entreprise d'environ 640 millions $, sans dettes.

DOMA exige une offre publique de 30% au premier trimestre 2025, suivie d'un rachat de 10% des actions plus tard en 2025. L'investisseur estime qu'InMode générera environ 150 millions $ en flux de trésorerie libre en 2025. La lettre critique également les récentes décisions de gestion, y compris le licenciement de dirigeants clés et le manque de diversification de la production en dehors d'Israël.

DOMA propose plusieurs actions, y compris la réduction des niveaux de liquidités en dessous de 100 millions $, l'établissement d'un petit programme de dividendes et la mise en œuvre d'une allocation stratégique du capital. L'investisseur a retenu des conseils juridiques et menace d'actions ultérieures si le conseil ne répond pas de manière appropriée.

DOMA Perpetual Capital Management, ein bedeutender Aktionär von InMode (NYSE: INMD), hat einen Brief an den Vorstand des Unternehmens gesendet, in dem er sofortige Maßnahmen zur Steigerung des Shareholder-Value fordert. Der Brief kritisiert den aktuellen Aktienkurs von InMode, der bei etwa 16 $ liegt, und hebt die substantielle Barposition des Unternehmens von rund 640 Millionen $ ohne Schulden hervor.

DOMA fordert ein 30%-Übernahmeangebot im ersten Quartal 2025, gefolgt von einem 10%-Aktienrückkauf später im Jahr 2025. Der Investor schätzt, dass InMode im Jahr 2025 etwa 150 Millionen $ freien Cashflow generieren wird. Der Brief kritisiert auch kürzlich getroffene Managemententscheidungen, darunter die Entlassung wichtiger Führungskräfte und das Fehlen von Produktionsdiversifizierung außerhalb Israels.

DOMA schlägt mehrere Maßnahmen vor, darunter die Reduzierung des Bargeldbestands auf unter 100 Millionen $, die Einführung eines kleinen Dividendenprogramms sowie die Umsetzung einer strategischen Kapitalallokation. Der Investor hat rechtlichen Beistand hinzugezogen und droht mit weiteren Maßnahmen, falls der Vorstand nicht angemessen reagiert.

Positive
  • Strong cash position of $640 million with no debt
  • Projected $150 million free cash flow in 2025
  • High margin business profile with strong IP
  • Significant cash generation capability
Negative
  • Stock price decline to $16 per share
  • Lower sales reported for Q4 2024
  • Key executive departures including Head of Sales for North America
  • Production concentration risk in Israel
  • Inefficient capital allocation with excessive cash holdings

Insights

This activist campaign by DOMA Perpetual represents a critical inflection point for InMode. The key focus is on $684M in cash reserves versus a market cap of $1.12B - an extraordinarily inefficient capital structure. The proposed 30% tender offer followed by 10% buyback could dramatically improve capital allocation efficiency and boost shareholder returns. The projected $150M annual free cash flow suggests the current market cap could be fully covered by cash in under 3 years, indicating severe undervaluation.

The operational concerns raised about sales leadership vacancies and geopolitical risk exposure in Israel are valid pressure points that could force board action. DOMA's retention of specialized legal counsel signals high probability of an escalating activist campaign if demands aren't met. This type of battle typically leads to either significant corporate action or proxy fights.

The letter exposes serious governance deficiencies, particularly in risk management and capital allocation oversight. The board's passive approach to both the CEO's destabilizing personnel decisions and the concentrated operational risk in Israel represents potential breach of fiduciary duty. The massive cash pile exceeding $640M without debt suggests ineffective board supervision of capital allocation.

DOMA's detailed action plan - including specific cash management targets, production diversification and dividend initiation - provides a credible framework for governance reform. The legal strategy engaging firms in both US and Israel demonstrates sophisticated preparation for a potential proxy battle. These governance issues typically result in either board refreshment or significant policy changes.

The proposed capital return strategy is mathematically compelling. With $684M cash against a $1.1B market cap, the company is effectively trading at about 2x free cash flow when excluding cash. The suggested reduction to $100M cash balance with a credit facility is a more optimal structure for a company with InMode's margin profile and cash generation capability.

The combination of tender offer, buyback and modest dividend would create multiple catalysts for valuation improvement while maintaining operational flexibility. This balance sheet restructuring could drive a significant re-rating of the stock, as the market typically assigns higher multiples to companies with efficient capital structures and shareholder-friendly capital return policies.

Believes the Board Must Immediately Execute a Tender Offer for 30% of the Company

Lays Out Action Plan to Restore Investor Confidence, Including an additional 10% Share Buyback in 2025

Announces Intent to Fight for Shareholders Should InMode Not Take Appropriate Action

MIAMI, Jan. 15, 2025 /PRNewswire/ -- DOMA Perpetual Capital Management LLC, a significant stockholder of InMode Ltd. (NYSE: INMD) ("InMode") today sent a letter to the Board of Directors of InMode (the "Board") urging the Board to accelerate and increase its stock repurchase. 

The letter can be downloaded here

The full text of the letter follows:

January 15, 2025

To the Board of Directors of InMode Ltd.:

As you are aware from our previous communications, including our public letter of July 25, 2024i, we are among the largest shareholders of InMode Ltd. ("InMode" or the "Company").ii We are disappointed that the Company's stock price has not improved since our last public letteriii: in the wake of the Company's recent announcement of lower sales for Q4 of 2024, the stock price now sits at around $16 per share.iv1 At the same time, InMode is clearly full of cash. At the end of Q3 2024 it reported $684 million in cash on the books, and we estimate it currently still holds about $640 million.v The balance sheet has no debt and our analysis, based on the Company's extremely conservative 2025 guidance, indicates that the Company should produce about $150 million of free cash flow in 2025, if not morevi. In less than three years, the Company's entire market cap as it stands today will be cash.vii

According to our analysis, InMode's current market capitalization is trading at less than the cash on hand plus projected 3-year cumulative free cash flow.viii This is the lowest valuation in the history of the Company and one of the lowest valuations we have ever seen for a company with InMode's margin profile and dominance in its niche.ix The Company's board of directors ("Board") has no excuse not to act while the Company's stock is so historically cheap. The substantial cash on the Company's balance sheet belongs to its shareholders and should be returned to them without delay.

The Board should immediately execute a tender offer for 30% of the Company, to be followed by a 10% buyback for 2025.

InMode has no debt and maintains significant free cash flow.x It is irresponsible and wholly inefficient to run a business with this margin profile while maintaining such an enormous amount of cash, hoarding shareholder money without making efforts to improve shareholder returns. The company must reduce its cash level to less than $100 million if it hopes to restore shareholder confidence in a Board that has apparently fallen asleep at the wheel.

While the announcement of lower sales for Q4 of 2024 is disappointing, the larger issue at hand is the Board's failure of oversight.xi While the Board is failing shareholders on many levels, the three issues below indicate what we can only characterize as a clear-cut breach of its duties and responsibilities to the owners of the business.

First, recent actions of management – in particular, those taken by CEO Moshe Mizrahy – continue to create instability in the Company that we believe is driving down the Company's stock price. Notably, Mr. Mizrahy fired key senior executives ahead of the most important quarter of the year, including the Head of Sales for North America, a region which represents more than 50% of the Company's revenues.xii Of course, making personnel updates and refreshing talent is the prerogative of the CEO, but this is not what Mr. Mizrahy has done. Instead, he has simply left this crucial position empty and apparently, arranging for the sales teams to report directly to him. No one should be surprised that sales are down under these circumstances. This strikes us as grossly irresponsible behavior for the CEO of a publicly-traded company, and yet the Board has allowed it to continue despite the obvious negative consequences.

Second, the Board and management have made no concrete efforts to diversify production away from Israel.xiii We have encouraged this path on multiple occasions in our communications with the Company and have suggested the Dominican Republic or Costa Rica as possible locations. As we've expressed to the Board, this would lower costs and secure a portion of the supply chain outside of a country at war, and yet we've seen no movement to address these critical concerns. It is the responsibility of the Board to represent the true owners of the business, the Company's shareholders, and to provide appropriate oversight of that business, which necessarily includes awareness of and appropriate action taken with respect to key risks. Inaction in the face of these risks is, in our view, clearly a breach of those responsibilities.

Finally, as we've expressed above, the significant amount of cash on the balance sheet belongs to shareholders and should be returned to them. In its latest earnings release, the Company reported $685 million in cash on the balance sheet at the end of Q3 2024.xiv Per our calculations, even if the Company completed its announced buyback, there should be about $640 million remaining on the balance sheet.xv Assuming 70 million shares after the completion of the buyback and a price of $16 per share, the market cap of the Company would now be $1.1 billion.xvi If the $150 million in free cash flow we estimate based on the Company's 2025 guidance is indicative of the future trend, in less than three years the Company's entire market cap would consist of cashxvii – an absurd outcome for a company like InMode that could only come about through gross balance sheet mismanagement and failure of Board oversight.

To correct these issues, InMode should immediately:

  1. Name new Heads of Sales for all relevant regions and present them to the market. On a quarterly basis, the Company should disclose to investors improvements in sales by region. It is unacceptable to attempt to run a business without proper sales teams, and the announcement of new Heads of Sales and these ongoing disclosures are critical to restoring investor confidence.
  2. Address crucial business risks by moving a significant portion of production outside of Israel. This is critical for security and stability and will allow the Company to lower costs.
  3. Announce and execute a 30% tender offer of stock in Q1 2025, immediately followed by a 10% buyback for 2025. With massive piles of cash on the balance sheet and the Company's valuation at an all-time low, this is the best and most accretive way to allocate capital.xviii
  4. Open a small dividend of no more than $15 million in 2025 to start. Bringing the Company's yield to 1 to 2% a year, with small annual increases to follow, will bolster shareholder returns and create a path for shareholders who only invest in dividend-paying stocks to participate in the business.
  5. Bring cash levels down of the Company to less than $100 million and obtain a large revolving credit line in the event there is an urgent need for cash. Hoarding hundreds of millions of dollars in cash in case of an emergency, such as disruption of production caused by the war, is not the right way to address this risk and only harms shareholders. The Board has duties to its shareholders to appropriately steward their capital, and it is time to start acting like it.
  6. Strategically allocate capital until cash balances reach an efficient, effective level. Additional buybacks in Q1 2026 may be required, if many hundreds of millions of dollars remain on the balance sheet due to the business's strong free cash flow. If the valuation still remains low, the Company should execute another minimum 10% buyback in 2026.

InMode possesses superior intellectual property, to which its high margins and enormous free cash flow are testament.xix The recent destabilizing actions by its CEO, the failure to address key business risks, and the mismanagement of the Company's balance sheet have all contributed to a significantly depressed valuation and loss of investor confidence. But the Board still has an opportunity to correct course by taking advantage of the current valuation to return the Company's tremendous pile of cash to the shareholders to whom it belongs.

The Board has a legal and fiduciary responsibility to its shareholders. The path to honoring that responsibility is clear, and in the absence of corrective action by the Board, we intend to take whatever steps we believe necessary to hold the Board and management accountable to protect our rights. To that end, we have retained Olshan Frome Wolosky LLP as legal counsel in the United States and Barnea Jaffa Lande & Co. in Israel to advise us in the event we are forced to take action to fight for the Company's shareholders and its future.

Regards,

Pedro Escudero

CEO & CIO
DOMA Perpetual Capital Management LLC

About DOMA Perpetual Capital Management LLC:
DOMA Perpetual Capital Management LLC is an asset management firm based in Miami, Florida. DOMA Perpetual strives to achieve great investment results by identifying attractive, uncorrelated companies with sustainable competitive advantages, while limiting exposure to downside risks. It employs an opportunistic, fundamentals-based strategy that invests in companies across a variety of sectors and market caps throughout the globe.

Contact:
DOMA Perpetual Capital Management LLC
ir@domaperpetual.com

Disclaimer

This letter has been prepared by DOMA Perpetual Management LLC and its affiliates ("DOMA").  The views expressed herein reflect the opinions of DOMA and are based on publicly available information with respect to InMode Ltd. ("InMode, Ltd." or the "Company"). DOMA recognizes that there may be confidential information in the possession of the Company that could lead it or others to disagree with DOMA's conclusions. DOMA reserves the right to change or modify any of such views or opinions at any time and for any reason and expressly disclaims any obligation to correct, update, or revise the information contained herein or to otherwise provide any additional materials.

For the avoidance of doubt, this press release was not produced by any person that is affiliated with InMode Ltd., nor was its content endorsed by InMode Ltd. This press release is provided merely as information and is not intended to be, nor should it be construed as, an offer to sell or a solicitation of an offer to buy any security nor as a recommendation to purchase or sell any security. One or more funds managed by DOMA currently beneficially owns shares of the Company.

Some of the materials in this press release contain forward-looking statements. All statements contained herein that are not clearly historical in nature or that necessarily depend on future events are forward-looking, and the words "anticipate," "believe," "expect," "potential," "could," "opportunity," "estimate," "plan," "once again," "achieve," and similar expressions are generally intended to identify forward-looking statements. The projected results and statements contained herein that are not historical facts are based on DOMA's current expectations, speak only as of the date of these materials and involve risks, uncertainties and other factors that may cause actual results, performances or achievements to be materially different from any future results, performances or achievements expressed or implied by such projected results and statements. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of DOMA.

1 All references to $ are USD.

i Doma Perpetual Capital Management LLC., (2024, July 25). Doma perpetual sends letter to the board of directors of InMode urging the execution of a 40% tender offer. PR Newswire. https://www.prnewswire.com/news-releases/doma-perpetual-sends-letter-to-the-board-of-directors-of-inmode-urging-the-execution-of-a-40-tender-offer-302206114.html
ii Bloomberg Database, DOMA Perpetual Internal Calculations
iii Bloomberg Database
iv Bloomberg Database
v InMode Company Filings, DOMA Perpetual Internal Calculations
vi InMode Company Filings, DOMA Perpetual Internal Calculations
vii DOMA Perpetual Internal Calculations
viii DOMA Perpetual Internal Calculations
ix Bloomberg Database, DOMA Perpetual Internal Calculations
x InMode Company Filings, DOMA Perpetual Internal Calculations
xi InMode Ltd., (2025, January 8). INMODE to report Fourth Quarter & full year 2024 financial results and hold conference call on February 6, 2025, expects Q4 revenue between $97.0m-$97.5m. PR Newswire. https://www.prnewswire.com/news-releases/inmode-to-report-fourth-quarter--full-year-2024-financial-results-and-hold-conference-call-on-february-6--2025---expects-q4-revenue-between-97-0m-97-5m-302345003.html
xii InMode Ltd., (2024, October 1). INMODE announces departures of president of North America, chief medical officer and VP of sales USA as part of a global reorganization strategy. PR Newswire. https://www.prnewswire.com/news-releases/inmode-announces-departures-of-president-of-north-america-chief-medical-officer-and-vp-of-sales-usa-as-part-of-a-global-reorganization-strategy-302263201.html, InMode Company Filings, DOMA Perpetual Internal Calculations
xiii InMode Earnings Calls and Conference Presentations
xiv InMode Q3 2024 Earnings Release
xv InMode Company Filings, DOMA Perpetual Internal Calculations
xvi DOMA Perpetual Internal Calculations
xvii DOMA Perpetual Internal Calculations
xviii InMode Company Filings, DOMA Perpetual Internal Calculations
xix InMode Company Filings, DOMA Perpetual Internal Calculations

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SOURCE DOMA Perpetual

FAQ

What is DOMA demanding from InMode (INMD) in their January 2025 letter?

DOMA is demanding a 30% tender offer in Q1 2025, followed by a 10% share buyback later in 2025, along with reducing cash levels below $100 million and implementing a dividend program.

How much cash does InMode (INMD) currently hold as of Q4 2024?

According to DOMA's estimates, InMode holds approximately $640 million in cash with no debt.

What is InMode's (INMD) projected free cash flow for 2025?

Based on the company's guidance, DOMA estimates InMode will generate about $150 million in free cash flow in 2025.

What are the main criticisms of InMode's (INMD) management in DOMA's letter?

The main criticisms include firing key executives including the Head of Sales for North America, failure to diversify production outside Israel, and inefficient capital allocation with excessive cash holdings.

What legal action is DOMA preparing against InMode (INMD)?

DOMA has retained Olshan Frome Wolosky LLP in the US and Barnea Jaffa Lande & Co. in Israel as legal counsel to protect shareholder rights if the Board fails to take appropriate action.

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InMode Ltd. Ordinary Shares

NASDAQ:INMD

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#2345 Ranked by Market Cap
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INMD Latest News

Jan 16, 2025
InMode to Report Fourth Quarter & Full Year 2024 and Hold Conference Call on February 4, 2025, Earlier than Originally Announced
Jan 8, 2025
InMode to Report Fourth Quarter & Full Year 2024 Financial Results and Hold Conference Call on February 6, 2025, Expects Q4 Revenue Between $97.0M-$97.5M
Nov 6, 2024
InMode to Present at Upcoming Investor Conferences
Oct 30, 2024
InMode Reports Third Quarter 2024 Financial Results; Quarterly GAAP Revenue of $130.2 Million (which consists of $98.3 million of net sales in Q3 and $31.9 million of pre-orders from the first half of 2024)
Oct 24, 2024
InMode Granted Preliminary Injunction Against Online Sellers Prohibiting Counterfeit Sales of Morpheus8 Radiofrequency Devices and Cartridge Accessories

INMD Stock Data

1.29B
59.86M
10.76%
63.73%
7.87%
Medical Devices
Healthcare
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United States of America
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