Kyle Rose: So, I just wanted to push back a little bit or just dig a little bit deeper into guidance for 2023, and particularly, the prior comment about Empower being a 20% grower year-over-year. I mean, look, we — you came into the year ’22, looking for that to be $20 million. You finished over $45 million. I guess I know you understand you’re being conservative, but it seems to imply a slowdown in year two. And I would think that it would accelerate in year two, just given the focus you’ve had on rebuilding that market. So can you maybe just help us understand how you’re thinking about specifically Empower in the women’s health market as we move into 2023?
Moshe Mizrahy: Well, yes, we actually launched the Empower in Europe a few months ago. And we’re now working country-by-country to get the final regulation from the regulatory bodies in each country in order to be able to sell it there. Don’t forget, it’s a woman health product and its need to get separate regulation. We did the same in Latin America in the fourth quarter, and we applied to regulation in Brazil, Mexico, Argentina, and also in Colombia. Hopefully, it will not take longer to get it. So, I assume that some time towards the second half of this year of 2023, we will start seeing some results in these two markets. I want to remind everybody that this is something that’s relatively new to us, and we need to be very careful in the way we progress in this product to make sure that the doctors will be well trained and it’s entitled to build training centers in every country, have a luminary doctor, one or two or three in every country.
It’s a process. We try to be conservative in the guidance that we’re giving, also in the United States. Yes, you’re right. We gave a guidance of $20 million and we did $45 million. This is great for us. Hopefully, the numbers that we will achieve in 2023 will be higher than 20% growth. But again, we try to be conservative and to see what will happen during the year.
Shakil Lakhani: I’ll just add further to that. With any product launch, you’re going to have some low-hanging fruit to start, and so we try to factor that in and still being conservative. I think we’ll have a better idea midway through the year of how we’re looking. But we feel good about the market. We’ve seen some good stuff. We’re going to penetrate the core specialties of that market a little further and continue to actually add on, very similar to what I mentioned with Envision, add on some specialty reps to that. So, we do think that there’s a bright future there. But again, factoring in some low-hanging fruit that from new buyers, we are excited about new technology, and then obviously, like we talked about with BodyTite for years, where we want to build longevity with the product.
And as we’ve seen with, even Morpheus, it’s become a brand, and it’s been growing like we didn’t ever expect, and we’re hoping to get the same here. But we’re still always cautious with how we kind of forecast things.
Kyle Rose: No, I can absolutely appreciate that. And then let’s kind of translate that to the Envision product. I mean, it sounds like you’ve got some early positivity or positive signals coming out of Canada. This is going to be the first year of that product sometime in the first half. Is it fair to think about that as half of the initial guidance of what you thought Empower was, so like a $10 million to $20 million product? I mean, how should we think about that launch this year?
Moshe Mizrahy: Well, regarding the Envision, we decided not to give a guidance, but rather to launch it in the United States slowly, gradually. And again, this is a new market for us, learn how the ophthalmology is and the optometrists are making decision, what kind of financing they can get. I mean, as we grow in this new category, we will be able to give a better guidance and a better view of the market. We’re just in the starting point. We sold some system in Canada as a soft launch. And again, as I said, we have decided not to give a guidance on the Envision at that point.
Kyle Rose: Okay. And then last question, and I’ll hop back in queue is how should we be thinking about the China business moving forward? I think historically, you framed that somewhere $2 million to $3 million, which can go to $4 million a quarter. But obviously, COVID has had a major impact there. How do we think about those trends as we move into, hopefully, more of a reopening or less of a COVID headwind from China?
Moshe Mizrahy: Well, although China opened the doors and everybody can go to China and travel, but there are some restrictions in China for the local people, and we have difficulties to find doctors and trainers to go there because of the COVID situation now in China. And I’m sure that everybody understands the situation when they have around 30 million every day infected. So, I believe that 2023, we’ll see what will happen. We’re still selling in between, as you said, $2 million to $3 million per quarter. Hopefully, 2023 will be higher. But right now, until we — we will understand what is the situation, we’re not claiming any marketing activity in China, bringing people and trainers from overseas to do some workshop and conferences because we know that the local private clinics are closed because of the COVID, although China is open.
This is something that I don’t understand what is — what kind of philosophy and strategy is as regard from the government of China. But we’ll — hopefully, it will be cleared within the first quarter or the second quarter, and we’ll be smarter to answer this question.
Operator: Thank you. Next question will be from Mike Matson Needham & Company. Please go ahead.
Mike Stephen: I just want to go back to the guidance for your OpEx or operating income, I guess, maybe it’s a better way to put it. So, it sort of implies about a 400 basis point decline from around 49% operating margin in 2022 to 45% in 2023. So can you maybe just talk about why that’s declining as much as it is and kind of where you’re investing in ’23 to cause that?
Moshe Mizrahy: Yes. I mean, the gross margin basically will stay the same. The guidance for the gross margin will be between 83% to 85%. So on average, it will be 84%. And I believe it’s a great achievement taking into consideration the cost of electronic components and the supply chain, which is still broken. It’s not yet back to normal. But we have decided to spend more on marketing, from 31% of revenue to 35% or 34.5% of revenue. We have decided to increase R&D and clinical work, especially in the women health and also in other elements. And basically, we have decided to hire more people. And therefore, the EBIT will go down by 4.5%, almost from 49% to 44.5%. But we see that as an investment. We will invest heavily in 2023 on the Empower and also on Envision, which are new territories for us. It’s not like aesthetic. And therefore, we have decided we have the resources and we need to develop it, although it’s an expense, but we consider it as an investment.
