And therefore, it does not reflect what’s going on. As you know, more than 50% of the quarter revenue are being generated in the last month, which is December. But I’m very optimistic that we will do the $140 million. If it will not happen, we will notify everybody. Now regarding 2024, we do not have a target yet. We want to see what will happen on the market in Q4 as far as the slowdown and the slowdown in the economy and mainly on the medical aesthetic. Toward the end of the year, we will do some kind of analysis of all the territories. We’re working on preparing a budget for 2024. And based on that, we will give a guidance.
Matthew Taylor : Got it. Maybe just one follow-up, ask the question in a different way on Q4. The implied growth rate for your guidance at the midpoint is about 70% or so. So I guess why is that the right number? Why wouldn’t it be 2% or 12%? How did you arrive at 70%? What are some of the key inputs that are informing that level of growth versus something lower or higher?
Moshe Mizrahy: Yair, do you want to answer that?
Yair Malca: Sure. I think what we did is we looked at the different territories. We obviously see the slowdown impact more significantly some of the territories than others. So some of them would not grow year-over-year. Some would and offset the ones that would not. And looking at taking all this into the mix, we arrived to this slight single digit growth year-over-year. That’s in terms of revenue. In terms of profitability, we assume slightly decline in profitability, but not that much operating margin. In Q4, we expect it to be around 44%, which is a very healthy and respectable margin.
Moshe Mizrahy: I want to add something. I just want to add something here as far as the Yair talks about territories growth. Yes, Yair is right. For example, although it’s relatively smaller than North America, but the market in Asia is not slowing down yet. Although, we start seeing something on the fourth quarter, and therefore we had to do some weighted average between the territories to come up with the guidance. As regard to profitability, I’m sure you noticed that our gross margin is still very high, 84%. Even with the inflation and the cost of component, which is going higher and higher every quarter, because of inflation, we still maintain 84% without raising the prices on the market, without raising the prices of our equipment on the market.
We did not raise price in any territory yet. We might but not yet. And therefore, on keeping the 84% gross margin on the third quarter, even in the slowdown time, was a challenge. And I want to compliment all the operation team, the manufacturing, the engineering, the design, everybody that’s working, I would say, parallel to their regular work on new product development, working on how to improve the process, how to improve the supply chain, how to improve the manufacturing and the testing in order to keep this 84% gross margin. It’s not easy. Okay. That’s something that everybody needs to remember. Our marketing and sales cost this quarter was a little bit higher than usual because we have several one-time events. User meeting in the US for 1,000 doctors.
Summit meeting in Cyprus. We bought a patent, which also costs go to marketing. We also terminated one of our distributors in Germany in order to establish some subsidiary there, our own fully owned subsidiary, and that cost us a little bit money. So we have some event in the third quarter that affect their marketing and sales expense by at least $3.5 million , which are not genuine and not regular. So, and therefore, the operating earning went a little bit down due to these expenses. But overall, even with the slowdown and even with all the challenging time that we’re having in Israel and on the market, we managed to make a nice net profit and nice gross margin.
Operator: And our next question today comes from Danielle Antalffy with UBS.
Ryan Barocas : Hey, this is Ryan Barocas on for Danielle today. Thanks so much for taking our questions. So just on Q3, I just want to try to better understand the timing of some of these impacts within the quarter to reconcile with some of the inter quarter commentary you guys made. So when did you really begin to see the impacts from seasonality and interest rates? And how much of the slowdown in Q3 and I guess in Q4 comes from the impact on the financing side versus any potential real demand softening for your systems?
Moshe Mizrahy: Well, I think it’s very difficult to calculate how much from the slowdown came from the economy, how come from the slowdown came from the interest rate, how much from the slowdown came from the time take to approve leasing process? We never made this kind of calculation. For us, it’s accumulated of all those reasons, all those effects. I mean the fact that it’s slowing down on the full economy, the fact that the doctor thinks twice if they want to buy equipment with 14% leasing package and well interest rate, the fact that take longer to get the leasing and, in the meantime, doctor think again if he wanted the system. In addition to that, I’m sure you know that more than 50% of the revenue are being generated in the last months of the quarter.
That’s always. That’s not typical to slowdown and not typical to anything. And especially that if for example in the last days of the quarter, you close deal and you don’t get finance, those deals stay on the table for the next quarter and usually they disappear. So you can put all those elements together in order to come up with what we have explained in the press release and now on the question. There’s no quantitative calculation what will be the effect of each one of those factors. It’s a combination of all.
Ryan Barocas : Got it. Thanks, Moshe. And then just on capital allocation, just love to get an update on your latest priorities there. So with cash now, just over 40% of your market cap. Is there any additional urgency on your end to put money to work here? And with the meaningful drop in your share price, would you more consider any sort of share buyback or even a dividend program here? Thanks so much.
Moshe Mizrahy: Well, we thought about buyback. We thought about buyback for a long time. But I have to say two things. One, our previous experience with buyback, actually we did buyback for $100 million, did not help, did not help at all. And the stock did not react to that. It was not now, but it did. Second, I’m sure you know that one of our competitors, a company called HydraFacial, which market the product to the same market that we do, mainly to spa and less to doctors, but they sell also to doctors. They have announced six weeks ago that they are doing buyback of $100 million, official buyback, $100 million. We all expected their stock to go up. The stock price when they announced it was $6.3. The stock price today is $4.
So they lost 35% of their value in the last six weeks right after they announced the buyback. So it’s made us to think twice if this is the best way to support the stock, to do a buyback. Usually we believe that buyback is something that will help few days and the market will forget that. And therefore we’re better off keeping the money and looking for M&A opportunity, business development opportunity, things that we can do with the money better than just spending on buying stock. That’s what I can say. We are exploring some opportunities for M&A. We have nothing to announce yet and nothing to show. We tried few things but the prices were too high for us. We tried to find something that have the right profitability. Although, I’m not sure we will find something with 84% gross margin, but something similar, something that complement our technology, something that will be a synergy to our business, but we don’t want to do it in a rush.
Maybe right now in a slowdown situation, maybe there will be more opportunities, but that’s something that we will explore.
Operator: And our next question today comes from Dane Reinhardt with Baird.
Dane Reinhardt: Hey, thanks guys. Maybe just a question for Shakil, Yair kind of on the end consumer and if you can give any color on what you’re hearing kind of from your surgeons, doctors out in the field. I mean, I know you talked to kind of the consumables growth still growing at a kind of a healthy greater than 25% or whatever, but that is down from a bit over 40% for the past few quarters. So just want to see if there’s any incremental color that you can give there and if you’re seeing some patients, maybe defer, push out these procedures given the macro pressures right now.
