InMode Ltd. (INMD) Cash Flow Statement

The 2024Q4 ratio of 0.39 was distorted by a one-time tax benefit that inflated net income, while 2026Q2's ratio of 1.23 reflects more normalized operations. This volatility suggests that reported net income may not consistently translate into cash, warranting scrutiny of accruals and non-cash items. Investors should monitor whether the ratio stabilizes near or above 1.0, as it currently appears to be recovering from a trough.

The FCF margin recovery is driven by stable operating cash flow and minimal capex, but the underlying revenue decline indicates that the company may be managing costs rather than growing. The gap between FCF and net income has narrowed, with FCF exceeding net income in 2026Q2 ($20.8M vs $17.1M), which may indicate improved cash conversion. However, the sustainability of this trajectory depends on reversing the revenue slide, which appears uncertain given the discretionary nature of aesthetic spending.

With capex never exceeding $0.6M in a quarter, InMode's capital intensity is exceptionally low, allowing nearly all operating cash flow to convert to FCF. This suggests that the company's growth is not constrained by physical asset expansion, but rather by sales and marketing effectiveness. The low capex also implies that depreciation is negligible, so reported earnings are not significantly burdened by non-cash charges, which may support the quality of earnings.

The large negative working capital changes in 2024Q3 and 2025Q4 suggest that InMode may be extending payment terms or experiencing slower collections, which could signal softening demand. Conversely, the positive change in 2024Q2 indicates a release of cash from working capital, possibly due to improved collections. This volatility complicates cash flow forecasting and may indicate that the company's cash conversion cycle is not stable, warranting close monitoring of receivables and inventory trends.

The buyback activity is substantial relative to net income, with 2026Q2 buybacks exceeding net income by 3.3 times, suggesting management is confident in the company's cash generation. However, the lack of dividends and minimal acquisitions may indicate a limited growth pipeline, as the company appears to be returning excess cash rather than reinvesting. Investors should assess whether these buybacks are accretive given the stock's valuation, and whether the pace is sustainable if cash flows weaken.

The cumulative OCF/NI ratio is 0.85, indicating that InMode has generated less cash than reported earnings over the period, largely due to the 2024Q4 tax benefit that inflated net income. Excluding that quarter, the ratio would be closer to 1.0, suggesting that earnings quality is generally sound. However, the persistent working capital outflows in recent quarters may indicate that the company is investing in receivables or inventory, which could pressure future cash conversion if demand does not recover.