DEEP RESEARCH · INBODY
[InBody] Sharing IR Reply to 3Q24 Quarterly Report Questions
Reorganizing seven shareholder questions and the company's answers through cost, new-business, and growth-strategy lenses
0. Bottom line first
The core of IR's response is that this cost increase is closer to product-mix change, early fixed costs at newly established entities, and planned investment in global sales infrastructure than to collection risk or unexpected one-off expense. However, policy targets such as long-term cost of capital, reinvestment rate, revenue growth rate, and operating margin have not yet been specified, so shareholders still need to keep checking them.
1. Core questions in the sent email
Official fact: On Friday, November 15, 2024 at 4:09 p.m., an email asking about the 3Q24 quarterly report was sent to InBody's IR representative via the PR team address <pr@inbody.com>. The sender was identified as an individual shareholder holding InBody shares.
The questions summarized issues that came up after reviewing the quarterly report and the business situation in detail. The seven main questions were as follows.
- Whether the large increase in automatic blood pressure monitor prices this quarter was related to inclusion of the KORT product group
- The purpose of the increases in land and building assets at Cheonan Plant 2, by KRW 178.5 million and KRW 23 million respectively
- Whether the KRW 1.1 billion in dividends stated in the report came from overseas subsidiaries
- The main reasons for losses at KORT and BWA, whether KORT reflects early investment in a new business, and why BWA, understood as the California sales subsidiary, is loss-making
- Whether the increase in current-period loss allowance came from receivables collection risk or another factor
- Detailed reasons for employee costs rising from KRW 14.0 billion to KRW 17.0 billion, advertising from KRW 1.7 billion to KRW 2.9 billion, and total SG&A from KRW 32.0 billion to KRW 40.0 billion
- The concrete strategy that allows the company to remain confident in continued revenue growth
2. Company replies on price, assets, and dividends
| Question | Company reply | Takeaway |
|---|---|---|
| 3Q blood pressure monitor price change | Mainly due to change in the sold product composition, or product mix. KORT products are included, but their share of total revenue is not large, so their effect on price changes is limited. | KORT is not the main cause of the price increase; mix change matters more. |
| Cheonan factory asset increase | It was not a new real-estate acquisition. Costs such as maintenance after acquiring the existing real estate were reflected as capital expenditures. | This should be understood as follow-up spending on existing assets rather than a new factory purchase. |
| KRW 1.1 billion in dividends | Dividend income from a domestic LP investment. | It was domestic LP investment income, not dividends from overseas subsidiaries. |
3. KORT, BWA, and loss allowance
Official fact: The company replied that both KORT and BWA are in the early stage after establishment and are in a period when fixed costs such as labor costs are being incurred. It expects operating margin to improve once revenue reaches a certain scale and described the current costs as investment for future growth.
Official fact: The company replied that the increase in current-period loss allowance was not due to higher receivables collection risk, but to a partial change in the loss-allowance setting standard compared with the prior period.
Interpretation: The explanation is closer to a change in accounting standard application than to the collection-risk increase I had worried about. Still, later quarters need to confirm whether fixed costs at the new entities are absorbed by revenue scale and lead to actual operating-margin improvement.
4. Details behind SG&A increase
| Item | Change | Company reply |
|---|---|---|
| Employee costs | KRW 14.0 billion to KRW 17.0 billion | The main reason is increased employment from hiring. |
| Advertising | KRW 1.7 billion to KRW 2.9 billion | Reflects online advertising by headquarters and the U.S. operation, plus expenses related to overseas exhibitions and academic conferences. |
| SG&A | KRW 32.0 billion to KRW 40.0 billion | Part of planned investment. The company is expanding overseas sales infrastructure to strengthen global sales capability and is actively hiring for that purpose. |
Interpretation: The SG&A increase should be viewed as planned spending tied to global direct sales and overseas sales infrastructure, rather than accidental expense. The key question is whether this investment is recovered through sufficient revenue growth.
5. Revenue growth strategy and long-term financial policy
Official fact: The company said it is investing ahead of time in an overseas-subsidiary-centered direct-sales system and stronger local sales infrastructure to expand globally. In the U.S. market, it said growth has been rapid through channel diversification and market expansion, including supply to the Marine Corps and Army units.
Official fact: On products, the company said it is building lineups by price and performance level to match market demand and launching premium products to secure diverse customer groups and improve profitability. It also said it is developing software solutions based on body-composition big data and pursuing entry into the medical market.
Interpretation: The long-term cost of capital, reinvestment rate, revenue growth rate, operating-margin targets, and treasury-share purchase criteria that I additionally requested have not yet been provided as concrete numbers. The company said it recognizes these as important policy issues and will deliver shareholder opinions to management for sufficient review in future policy setting.
6. Remaining shareholder questions
- When will the planned SG&A increase begin to translate into revenue growth and operating-margin improvement?
- What revenue scale must KORT and BWA reach to absorb their fixed-cost burden?
- What long-term growth rate can overseas direct sales and U.S. channel diversification create?
- How will the company manage declining shareholder returns while retained earnings accumulate?
- How does the company view the risk that profit growth falls below the cost of capital?
I delivered my concerns as an individual shareholder and appreciate the company's reply.
Sources
- InBody PR team email link: pr@inbody.com
- Naver Blog original: https://m.blog.naver.com/PostView.naver?blogId=star_of_self&logNo=223667579116