INGN - Earnings call transcript Q3 2017

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Operator

Good afternoon everyone and welcome to the Inogen 2017 Third Quarter Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation there will be an opportunity to ask questions. [Operator Instructions]. today's being that note also event recorded. is Please to conference call this time, to the like I'd At over turn Mr. Matt Bacso, Investor Relations Manager. ahead. go Please

Matt Bacso

Thank call. today's participating for you in

Joining Inogen's for Relations company's the CFO quarter of the Wilkinson Earlier CEO, Investor earnings section Inogen are third from website. release currently This Ali in and today, results the Co-Founder, presentation Bauerlein. and financial released XXXX. Inogen is corporate of and Scott available

and statements more will except forward-looking As and forth are we growth periodic significantly, to risks about uncertainties are a disclaim available XXXX Exchange most us. Securities recent currently vary including obligation the are forward-looking that detail forward-looking reminder, these required call filed European our Actual to projected only in statements with developments, in on the The statements by for our today hiring, Commission. and manufacturing law. include as These expectations, presented any reports results marketing maybe and and forward-looking prospects, and XXXX. information based this set statements, in may predictions information results growth, financial involve update statements

under historical & to the our presentation in financial Investor for posted more and filings Market these Filings third investor Relations quarter have We Information, statements respectively. refer website SEC News on Please information. detailed

U.S. and decisions. non-GAAP tables between are measures uses core Inogen's and U.S. GAAP in both excluding earnings make with other on basis. for expenses Management in internally non-GAAP investors conjunction operating indicative operating by a Reconciliations financial that believes of business useful we'll not to information financial presented items our manage During understand, certain our financial call, Management release. non-GAAP measures certain non-GAAP and and evaluate within the taken present also measures management that results noncash information and GAAP results. provide are

I'll without GAAP most periods, to non-GAAP we unreasonable provide Inogen's unable the reconciliation comparable to of our to over discussed Scott earnings CEO, detail the in and future directly more effort, With guidance call measures in our turn that, For Scott? President Wilkinson. as are a release.

Scott Wilkinson

and you quarter XXXX third Good conference for thank joining Matt. Thanks, afternoon call. our

the at hit the enable same in quarter glad these business-to-business patients say success business-to-business the on and channel. total reflecting our we period quarters, we revenues hurricanes hurricanes. major international saw year, advance that United them and over oxygen proud several portable past our channels we of evacuate in XXXX, very multiple direct-to-consumer our quarter impact build to I'm and last Looking growth that This XX.X% million. concentrators in domestic our helped sales and the the of Overall, States of the many hear over from from third in to we impressive great results record represented sales performance minimal our third to of were saw financial that XXXX, of $XX

income less net delivered of $X.X than represented EBITDA XX.X% XXXX. in $XX.X which we've seen over revenue we XXXX, the the from was of of respectively offset million, expected represented of quarter quarters, in quarter and third revenue by increases As and third the growth In the million our quarter, the in revenue, XX% than which of rental more decline our in prior channels. sales adjusted XX.X%

to States. sales continued the direct-to-consumer We invest United steadily in additions force in

investing or and in and pleased sales CRM improvements have third that to system, delivered were quarter training still while productivity worked strong solid and during new we such I'm the customer system. optimize the bottom in we results line also We our management relationship

of in Looking all oxygen quarter innovative for our at saw our demand streams channels across revenue sales of in detail, strong we third portfolio the more XXXX. concentrators our

XXXX, third in Our also third of over XX.X% quarter XXXX increased the the expectations. of quarter sales exceeding direct-to-consumer our

inside sales our third primarily new add we team's quarter sales our of with and Cleveland performance. continued representatives steadily are in area pleased We XXXX, in facility, new the to

hire Our the increase believe most of of in we additional in effective sales. this awareness is strategy means as consumer is drive invest still sales activities fourth throughout employees to growth marketing quarter to XXXX XXXX and our and to direct-to-consumer

XXXX. As I in will of this launched CRM rollout. we mentioned are departments as we and our June, our system especially improve still billing the We service, optimization phase believe look productivity customer new in the we sales, briefly, system and of into help

impact work numbers sales our productivity increased the due to still and productivity sales in able through we see of to the quarter the we the improved improvement third were did were of to gained quarter to the quarter Although we XXXX. already improvements while strong the our compared new CRM direct-to-consumer department third XXXX, XXXX sales the Due in overall direct-to-consumer expected headcount in productivity third productivity XXXX, direct-to-consumer system since show of learning third curve. quarter

of and traditional quarter over represented Revenue We increased channel from XXXX, half than our of more XXXX. home with providers very XX.X% Growth label from the domestic domestic HME the third quarter strong purchases are of private of sales sales private quarter third primarily label XXXX, in in channel's combined medical demand. providers expectations. revenue in business-to-business our business-to-business equipment this pleased the traditional partner total was the and exceeding by which third driven our

their providers reimbursement last as space. Inogen HME the portable concentrators the growth period the sales turn leader the costs quarter, operating they year. in to reflecting also same turning face and oxygen We reductions, of lower to International business-to-business to traditional in the nicely see XX.X% in performed are continued of over to

result, this the with of major the quarter of were there pleased tender contracts in quarter spite are third fact in third and no especially of strong XXXX new very XXXX. a compared to We

we opportunity portable former in in are believe see new We center the you and provider a concentrators As of are to operations. One production we we improve integration to continues targeted our ahead Foxconn, potential according to this transitions contract to preferred Europe, distributor, we In oxygen GX market large, happy of a our the to XXXX, manufacturer, begin I'm of fourth concentrators report Republic, located and Inogen might non-delivery as liquid support solutions. acquired our be recall, quarter long-term the to in European our Czech service European European May the systems ability our in to Systems, from proceed organization using plan. sales, commercial MedSupport tank that to that XXXX of oxygen of of customers. our

multiple familiar of the globe is with those and For in relationships contract world. companies facilities around one the you and manufacturers with most not most influential electronic it the largest world, of Foxconn, in manufacturing the the some the with well-respected of

partner capacity Inogen XXXX to European manufacturing ramp required is to to expected support our Our produce concentrators in One demand. GX

and bed One focus full manufacturing our manufacturing our like Inogen Inogen the facility U.S. in capacity for We our assembly Goleta, and expect data and redirect market columns One at allow product, CMS on in year on from to in comment to facility on expand California. and we'll Medicare Texas compressors us U.S. our GX. Inogen for concentrators Home latest growth our operations XXXX. This recently the to to our and I the released at activities assemble At the would also will maintain sieve continue Richardson, our concentrators to

information, XXXX. a on XXXX oxygen that such has proxy set, the serve to brand therapy absence oxygen limitations as or the when X.X% manufacturer can picture data believe information information X.X% as the therapy for we this of the While CMS used the we assemble a some share therapy to that market, portable of entire Medicare in the in market. oxygen Based in of estimate from concentrators grew oxygen

sales cash patient transactions. include not or does estimate private this However, insurance

sales than cash XXXX rentals. direct-to-consumer Our significantly grew in faster

opportunity So POCs oxygen were in market we conservative estimate oxygen saturation. still a That based the before reaching market have significant full said, a data data this represent believe may and the from fastest-growing that actual penetration. therapy on of portable still CMS concentrator CMS modality growth

reimbursement as Bipartisan to non-bid round updates, would the with competitive in The Bill X, provide therapy. XX relief to a original XXXX introduced House reimbursement cut to well address retroactive XXXX, a from reimbursement on of that bidding January in a delay areas. oxygen as from cosponsors Representatives second double-dip of extend a was January would cuts Thursday of Bill X, Turning

Bill the when While busy pass, there's gathering as support to no have HME Bill. been data participants to could industry this specific date

the August, in late data of to access AAHomecare Management to Specifically patient Budget that presented dropped Office and survey indicated equipment presented significantly. legislation. has this to medical Data support home

and that find a a Specifically, their providers, HME of did stated change supplier. approximately approximately patients, Dobson win beneficiaries provider Of not When have were expenses longer it forced that local regarding survey to increased & conducted Medicare, bid. also to out to supplies. Medicare went XX% out-of-pocket difficult prior stated oxygen-only down HME did business, because no narrowing so either increased have those Associates accepted of complaints of DaVanzo HME access the found who DME they they it local respondents to by acquire stated XX% XX% or

showed to areas. this access suggests takeaways; in on to data portion to relief two due lack we therapy. data data, the patient lack the oxygen the of XX of pricing access the believe out least at have of reported could majority case elevated readmissions a of of XX, Lastly, one, rural which Based managers, to patients, we lead the

resulting continued was POCs that at reimbursement the lack XXXX. service been hospital elevated competitive and in validates guidance as announcement struggling is therapy be two, readmission from on around the should We CMS delivery and option additional However, overall this superior bidding adjustment note time. Further, conversion. needs, with is how the unclear higher would it healthcare funded. further rate basic this any into We And model believe result access, costs. to there's rural rates not not patients' our factored any this market of in

bidding rates begin effective XXXX. the coming we to to January expect be in months for X, However,

wanted the the an proceedings Group, we SDG. legal regards with provide Design or on Separation update Finally, to to

counterclaimed two against filed As misappropriation breach patents, alleging of obtaining October conduct of inequitable of trade a by a allegations SDG SDG in and Inogen Inogen XXXX, secrets, the of infringement contract. in lawsuit with patents. reminder,

that with in in Included for alleged announce, in and to may rights quarter damages out future million. alleged be years. cover estimated We suit XXXX with are happy The this in of third $XXX,XXX is be issue five damages from patents remaining These to past amortized settled court SDG with been administrative patents expected free expenses this future in and Inogen value settlement two both lawsuit the is XXXX to to general the SDG have full and family. of all-in patent $X quarter prior any next of recently fourth over an respect paid million damages. and of of for to $X.X the the associated

interest best of we maintains we company international I'm uncertainty, we on a shareholders and of quarter, during as when our customer Inogen integration no the came believe system. improved progress added a distraction and agreement prolonged committed the a our our it the settlement remove associates and Inogen management direct-to-consumer-focused the Although the expense, a continued of be our facility to U.S., to a new wrongdoing, relationship of really litigation. to operation, in our proud this especially time in

been momentum, these current growth seeing future we've markets the increased While and of engaged exciting our business-to-business in also and products. to growth, patient-preferred these fuel are best-in-class initiatives the our we very channels. pleased direct-to-consumer all especially And we've with I'm in sales with in penetration maintained

continues worldwide we and a adoption concentrators oxygen stages portable are grow. high-growth our in the early XXXX, force still at to expect company, remain sales of as to Looking

As of the Ali. we call to I revenue With over XXXX turn a Ali? that, will result, to million. $XXX million $XXX expect

Alison Bauerlein

Scott Thanks, and afternoon good everyone.

remarks, for my guidance review details will will I of review third XXXX quarter I our XXXX During performance, the financial then and XXXX. our and of prepared

third As total for growth was representing XXXX. quarter revenue million, quarter Scott of the over third XXXX $XX noted, the XX.X% of

marketing XXXX QX up revenue, same first year. sales third increased XXXX demand Looking reflected from in private prior units million, increased Direct-to-consumer XX.X% of XX.X% sales million growth increased quarter quarter of sales $XX.X to of XX,XXX traditional $XX.X and $XX QX total HME represented in strong of revenue sold and and the reflected revenue with and the quarter of growth million third total XXXX. at from the our growth partner. third over QX of turning QX our each business-to-business increased to XX.X% streams, XXXX, in to expenditures, over XX,XXX the of Total due were XX.X% revenue XX.X% of sales headcount, in our Domestic XXXX, over sales quarter XXXX, label XXXX providers productivity. in primarily the representing representative our

XXXX. was private other again equipment from versus business-to-business of the sales the Sales XXXX third the worldwide. rental in quarter XXXX, versus discussed declined of revenue QX business-to-business third XX.X% slightly of to the the associated discounts XXXX, million quarter due XXXX, was from and quarter third of towards over providers primarily down due the growth quarter international in Rental which We million, the X.X% represented in quarter Europe XXXX We sales expected in representing revenue to the traditional saw also demonstrated of prior XXXX, the in volumes international XX.X% growth third Rental in XXXX of period of average period decline the with a the sales same in XX.X% in revenue sales increased impressive XX.X% robust XXXX. quarter label primarily international to business-to-business sales third markets. revenue which year. in of quarter shift reimbursement in $XX.X of sales decline additional of total the and third in QX previously reduction. reflected the same due represented prior third third the in prices in of of year, XXXX With quarter over the selling $X.X home of medical the the sales XX.X%

sales, XXXX, margin, an XX.X% margin. cost overall to third rental total declining primarily XX.X% the to sold quarter XXXX. saw Turning goods per and gross increase margin, towards gross our to unit of gross We in by for margin the offset mix quarter third increased of in gross due of compared lower partially direct-to-consumer was

was of in margin third and primarily partially lower gross XX.X% declining was Our reimbursement improved XX.X% mostly driven reductions by third goods costs, was sold of of in Sales Rental third the revenue, lower by was margin in XXXX of quarter offset percentage and quarter cost partially rental average the per direct-to-consumer The with offset mainly towards increased to rental margin quarter associated selling versus lower in primarily third of lower the gross with unit, XX.X% XXXX. decline by the in margin the gross sales XXXX business-to-business XXXX. associated quarter prices. XX.X% material due mix versus sales gross of cost rate which depreciation.

quarter the quarter expense increased due in million expense $X.X in in revenue for to in Sales marketing XX.X% compared XXXX in the of personnel-related the versus operating Research a in the expense of quarter third As XXXX comparative expense, million total to $X.X of recorded and XXXX due in U.S. million versus of and in taxes $X.X the our expense income the The in administrative costs. defense quarter million quarter to increased primarily to compared $XX.X rate expense of XX.X% lowered the XXXX. compared higher advertising was versus to increased patent $X.X sales in increased million Standards ASU XXXX, the in $XX.X expenses. quarter XXXX. third the to by force with of $XX.X the third in quarter revenue million our $XX.X third XXXX in from statutory and million third XXXX to period in a quarter XX% primarily General third settlement tax and with in or rate of XXXX, of to expense, operating of XXXX. the quarter tax or decrease million $X.X rate. XXXX the of million personnel-related to by patent provision to decrease third rate benefits included of third development for effective was the increased of associated third XXXX. $X.X third related third Accounting litigation the ASU In taxes effective recognized million compared effective XXXX and XX.X% The stock-based XXXX, income in QX X.X% tax XX.X% $X.X for Update, as legal XXXX-XX provision quarter XXXX-XX, and expenses, excess compensation tax million of quarter third of quarter associated

prior million Our on XXXX, of comparative $XX.X of share an of third $X.X XXXX, the on and return marketable net million third Adjusted to $XX.X third EBITDA XX, quarter $X.X Cash, XX.X% the we million, in processing the in the in XX.X% for $X.XX and versus X.X% Adjusted of increase quarter Century increased of securities compared was and Medicare in in received third third claims XXXX the increase income XXXX. the was quarter cash $XXX.X of versus the quarter of Cures year June was of return fourth a versus period quarter of the XX%. in XXst were quarter revenue XX.X% million million, adjusted an with EBITDA diluted in million third increase EBITDA on versus million, quarter in payments which XX.X% of common the third quarter $X.X represented QX of the per We to compared $XX.X associated of of third were the XXXX, to or of equivalents, $X.XX the XXXX $XXX.X Earnings an a XX.X% revenue. million XXXX return finish these quarter as XXXX. XXXX. Act where revenue. XXXX expect in

Turning our which of of range previous to to This to XXXX increasing a year-over-year compares guidance of guidance, guidance to million $XXX $XXX we XX.X% to are to $XXX revenue million. growth million million, XX.X%. represents our $XXX

to focused business-to-business strategy rate to in have sales continue XXXX European expect channels channels in have international similar market. more year a full growth We and and growing to to year be XXXX, direct-to-consumer sales the the our rates to is expected growth on strongest full modest sales domestic be and business-to-business where

buying of tender timing mindful time we contracts to be and sales international are can that over customer business-to-business the pattern. due However, lumpy

in a approximately patient revenue focus based lower rentals. versus XX% by that will XXXX decline on per rental to XXXX and expect sales on revenue average We rental compared

are guidance forecasted our $XX million impact rates. $X represents ASU decrease in of XXXX stock We to XX.X% lower of which XXXX-XX on year growth. $XX in income still will We that effective estimate taxes XX.X% million income approximately to full activity, XXXX range of based maintaining the million, tax to a lead net for provision year-over-year for which our will

compensation XX% for XXXX. $X an from XXXX taxes expected in year full of deductions, in this provision rate expect for decrease approximately stock we effective million to XX% tax Excluding income

representing adjusted million $XX to the EBITDA previous We previously year are increasing over for million $XX to XXXX compares This amounts EBITDA. XXXX guidance year growth range guidance million, of full includes discussed. full the our to to $XX to XX.X% adjusted and $XX XX.X% patent million settlement

We are our to our our which we growth. contribute ramp continuing CRM area system invest facility, in media direct-to-consumer reps will to and new continuing while XXXX revenue facility, sales Cleveland expect related also the to European investments, and

We flow for for our our positive are net capital cash equity XXXX, meet operating required no confirming with current plan. expectation to additional

a year XX.X% range providing million. representing the XXXX to guidance XXXX XX% total million, midpoint $XXX also We guidance revenue $XXX of million are $XXX full to for over of growth

our have to to focused the international direct-to-consumer expect domestic rate, modest on a a business-to-business sales sales channel, fastest-growing sales where and European to growth be have will significant the strategy We be business-to-business market. growth still rate

to on XXXX revenue versus XXXX no We in are XXXX. meaning expect changes compared plus known sales relatively or focus flat, to minus due reimbursement X% rates There be Medicare in rental in rental. our continued to

XXXX million, a $XX of $XX estimate million XXXX $XX of over growth net to guidance providing full XX.X% to income are midpoint million. the XX.X% representing We year

XXXX activity, to over midpoint estimate are $XX a representing of guidance providing $XX We XX% to year $X on decrease $XX million in the effective lower ASU of of growth rate. stock the a our million. XXXX million, XXXX-XX of full U.S. to tax compared for would adjusted guidance provision We the million impact EBITDA the range lead taxes which income to forecasted for XX% as XXXX in rate based statutory approximately will

the amount tax rate stock expect decrease on in ASU XX%. of to taxes vary XXXX-XX income timing effective expected effective and net compensation size the the pretax After on and income in Excluding stock rate, considering XXXX, $X deductions, million of expect tax option of the quarter-to-quarter provision depending for an benefit, our including exercises. we we

cash and equity that, will We capital operating XXXX positive be also plan. your our to no expect net current Scott additional I questions. for With take flow with happy meet to required

Operator

today [Operator from Instructions]. comes Marcus first Morgan. ahead Please question And J.P. Robbie with question. from go our your

Robert Marcus

in both there. the on happened a quarter. congrats in what than, did BXB I quarter, even great DTC and to and and think, Wanted Hi, out start third much U.S. better estimates best

maybe about So and productivity, is understand us DTC, be what we on it, going rolling help that just how in into should hits what what you XXXX. thinking offset exactly can

Alison Bauerlein

take one, Yes, sure. that Robbie. I'll

headcount So really, with we the associated saw the on in side. the DTC we success that saw was that quarter increased the third

We having do in. allows That's throughout to said. the us have as capacity sales up, our spend is when direct-to-consumer. continued to work call that grow to the XXXX, Marketing with hire they leads the we've really factor

been we So have able to increase that.

also in have We the we to productivity been side. sales improve cash year-over-year that mentioned able

our on So we have reps spite headwinds of productive, saw that's that implementation. become CRM more the the in and

was So the knew take system up with of of we of step-back productivity on improved our a small happen. XXXX. that implementation spite the But people third in new the XXXX the of did third quarter curve to that, even compared associated That and quarter that. in would in learning productivity a coming we the

while growth. both site reps the key our ability are expect to fastest-growing you continuing first sales driver the able be really to we're contributions productivity, hired sales the to in in XXXX We've continue we invest our the sales So come to that people of our the the into materially half add second team's the we people in hire those because from know as the really to our half really to up four and that expect of to well. to that's we personnel. are six really that's still sales of year there. business the going more months direct-to-consumer contribute year, the expect And have starting we why why be to we that train sales take channel And proud to we Cleveland in been to to to and to see continue we XXXX. hired And

Robert Marcus

about historically, you Now a guide always visibility have Is since initial process, we have control guidance DTC, in you commented can more with how you the little BXB, the the confidence then aggressively more into maybe that for always channel. thinking you've XXXX be lot have a you in? you're most that And of still should DTC, of because that U.S. that confidence.

growth second of You to taking a once because accelerated more sales from third quarter, you're that maybe stance from bit process? conservative removed just the you're a

Alison Bauerlein

that, predict sales the media you and spend, up I I are people down more many reps the more response more the predictable sales their case, the closer have Robbie. have, Yes. we number of certainly And that of visibility coming rate. think and do that's more is still we of the new can so -- in we the and hire end how the consumer, curves know mean, much to team. analytics. the what's speed to productivity to it's And of that terms we

just still more business. to are we would I in shifted to the more there being, very converting that POCs. than we business-to-business become business high cautious underlying they while more direct-to-consumer of that optimistic and their guidance, of kind we side of we to will cautious still what putting the time conservative side, there from there, On of level growth dynamics end up the more the And seeing into we've of the be are over how model and on continue call, have because

the So same that have guidance is as previously. we had philosophy

Robert Marcus

has of new point anything Is competitors launches. terms aware that Okay. launches the product on of? we product from Thanks. think some And you'd for then just horizon like in to that rumblings be there last there been anything about should out or you me,

Scott Wilkinson

and direct-to-consumer for one. Robbie having a I patient-preferred folks got us engine know, as R&D for mean, on we've has product. the is really still brand that will I maintain our XX going curtain little we really it's when drives early behind you, I'll I'll I Thanks, growth the day what say, engineers exactly a our and we loosely a were Yes. you things That's the built over patient I've the take of GX. to the roll going working today, we But think sure I'll preference. a And the next the in -- much on, launched and the pipeline generation. now to past, our right think make after years. call GX to lot I what that what we're that said unveil tell this on out pretty engine last

pipeline, we've it's we hand. away want our but still got tip away competition enough product robust to a that the So far and don't give to anything

Robert Marcus

Great, thanks a lot.

Operator

question. Kaczor Blair. go Our your next Please from question with comes from Margaret ahead William

Malgorzata Kaczor

Hey, good taking Thanks afternoon guys. for questions. the

adoption and HME more of as XXXX, And of is you XX%, adoption share the market? seen rates POCs what bit of guidance me, tell on off, growth this share market of First placements specifically, benefit imply so probably, over into look we domestic share some to how a been has the tailwinds about you as market your that relative accelerating? you've BXB look at the for much the talk accelerating to your side, point does relative can at out you

Scott Wilkinson

take Yes, that in one, -- so I'll I kind let's Margaret. your question mean, I take of our guess, order.

middle they say going we trial, to a process sometimes have conversion people last before there's said actually in now but of conversion we're realize about it. the a people have a quarter right even that talked in were that that the in So

the up. relief rates. rates, going I that in mean, conversion these going When is the not strength reimbursement sustainable to just not dynamics in to the certainly inherent there's If isn't saw what it's really I the temporary think they're process. model you a be quarter in just rural look see of third at that we we enough at said we really what confirms some delivery change areas, the

be again, a a could So play providers, year that's our that It's little those XX goes in of a cash and a say out dynamics There's the really longer. mountain, that process, then to I'll we think all results credit there to think long-term to efforts. certainly a be could managing little of third and the and X and there's a But estimate still faster, are play. barriers; that purchasing climbing we the flow we're conversion just quarter.

our I confirms it think, mind, that. in

that as we've percentages, growth our a at as we higher percentages those and goals far if seen guidance talked those far our what are of where as just POCs. and little as look growth about than Now you goal, growth are, the the Ali market

the going expectation the now, unless our a to at least in that is, grow considerably is than to right past at in rate. rate conversion were it rate the a future up at faster and step higher So we're

you we're actually So that means at at just numbers, the taking the share. core, if look that

think, scenario. that's on I patient our on product again reliability is to be product, built preference a and or this also this Our, modality in necessary what's the but success built non-delivery used in really for

can't You have whole up products that it model. kind just break the down, of blows

started a scenario. the But HME that years, for product end and I success, two this that oxygen to strategy. as very works ourselves nine walk our proven last, in running our built say, back non-delivery years to eight, though for the homecare on years now providers those own think actually, we one non-delivery have product and ago, walking ourselves focused shoes Inogen, in go eight, even we we've were the to business for if nine in, user in last go-to-market the we've

and done of to think provider the go we've business proven that's And they it the and, their community because on frankly, changing us reasons that turns scale. one look as large a at there out mitigate that, we've said, one that that's product taking way I risk a proven model, different years scenario. completely been eight, operating some to go a nine is I we're product. like used And the risks with in business to that in

that answers growth and are hopefully, rates So question we as the we why far your as are. where

Malgorzata Kaczor

accelerating, adds necessarily but that that in an -- maybe from and have those you Are of are POCs one are and replaced it you idea well? the with a are as to POCs. already of that this maybe do to seeing your with seeing benefit fleet that And acceleration existing patient in maybe competitor the to is being upgrades doesn't POCs on follow-ups market, yours

Alison Bauerlein

It's hard really that. visibility on have to

nature. it's the say these replacement due cycle So tied would know say of the people their additions is POCs. is to I there it But majority POC in much We fleet. patient a more a or patient certainly cycle. replacement we be of how anecdotal existing converting to is really that mean, certainly to But hard portion a would tied life to anything

Malgorzata Kaczor

results then comp tough on a your growth, terms in second strong Okay. And as this topic, a very international obviously, just quarter. of

related some or So integration supplies? seeing growth? kind is med stable that of Are of your market Thanks. to you just underlying tender wins

Scott Wilkinson

growth. Yes. underlying it's market Overall, more say I'd stable

it that the at for pretty customers it's right You're across look a partners. comp and though, tough sales, was quarter well diversified we and third If XXXX. European our

we're and certainly in think into a that's say I was harvest key but comp I'll that. across throughout tough happy pretty result -- board a with we're saw I'm say that I that the It's driver. it because quarter. bringing pleased MedSupport And the knew going wouldn't Europe, again, to third into the we position we growth Inogen helps,

almost we're So with the did, I certainly to result. post that pleased that XX.X%, it's think XX% we growth

Alison Bauerlein

Margaret, and offerings the there were to third directly quarter. Yes, no major tender answer in just

a So that this drove wasn't increase. tied tender to specific that

Malgorzata Kaczor

guys. thanks Great,

Operator

from from Partners. go ahead Please with comes your Our Antalffy next Danielle Leerink question. question

Danielle Antalffy

guys. afternoon Congrats sure, very another no good good quarter. problem. Hey, Yeah, on

it about they'll get to reps going of even think the rep pricing, QX more think number a on the about sales leverage. is and So business my line gets DTC very some tied bigger, much contribute Thanks That's are offsetting what's to Cleveland you rep your on top the little I in question that's at about coming think didn't productivity hired, Number when this bit had two, quarter, QX productivity, -- line, question. the is beat was more maybe And how to online this facility, the to positive it first operating that one? ask hoping the color to that how and given leverage we here amount as see we start think I really top that? of can this of so just the sales you way, number we how why incremental force

Alison Bauerlein

Okay, I'll it. take

take try and all. them I think but it's I'll questions, more three like

in So let invest first. first, though and I'll in quarter continue starting the with leverage. I to any me -- so one take missed heavily last if but quarter. the know did just of third the them, We operating the

So look marketing number sales hires. new at as when the you spend of as expense, expanding we are the both well

year see as we we're up XXXX. really setting for It's and to is an that what that's investment executing ourselves strong And so said, are we continuing on. XXXX this really

sales So it was from an this that expense for to as value. opportunity great continue invest long-term to in create saw we us side in, the a direct-to-consumer saw leverage, to operating coming increased we

six the up about but start rep in contributing take months of the side, they come on to first Now to couple productivity, to four still they months.

four sales full that So through in and start they then making ramp certainly some productivity to six. months

costs producing. the when a not a So when a hiring they the also rep rep turn costs. it's when with, relatively it's from But rep, is hire quick you're start just marketing it's that to hired hit you

to they initially those in the for gate, leads you productive hires. out not as tend with marketing spend to have So of new more be so

XXXX continuing and that So, for XXXX factored of us side guidance grow of into all that our business. to is the and

Danielle Antalffy

is helpful. Oh, sorry. that Okay, very

Alison Bauerlein

year, an going And sales know that see investment operating were at still really forward, XXXX when force. XXXX, into do look asking I going as build of you we're out about we forward to leverage continuing kind where we

going I operating into XXXX. we're specific know on leverage leverage. not So And operating we maximizing don't for guidance give

the SG&A see you you direct-to-consumer point is more gross in the margin. faster, I operating thing but higher have less investment have growing you'll also side, would expense that other have leverage you because The more out

of a Now lower if with see profile expenses growing operating BXB the it. see you faster, you opposite gross but lower margin associated

factors specific or line top key and you leverage bottom time how leverage both operating and don't over see guidance focus and we kind to on certainly into margin gross operating that give of why So line instead.

Danielle Antalffy

Okay, POCs, on some what product, BXB are getting things, the seeing on that's of more putting your fair. so of overall outside And care then own you these just of patients providers just question even aggressive home side a on And on of your on that, are aggressive your seeing price top out competitors in of BXB are get much. then environment more also, because so of the that Thanks in channel? you the any there? sort or seeing of

Scott Wilkinson

I'll that take Yes, Danielle. one,

with in use what they've is or consistent of think five the expanded third in seen quarters POCs. I the the providers, quarter we've last four seen what of we've little cases, that now going on. expand within So maybe to bit And their branches segment POC a they're that's in that other patient organization. pretty some different maybe others, In a use to

or message across I seeing, XX,XXX and branches the think more the that the we're is feet, are growth using at that's that's why the And that's broader conversion. patients. segment all of call more, and part results I'll them different they're that whether market and you're what a of seeing

So that's, patients, was What branches, more question? your I'll second everywhere, more say, part etcetera. more of locations, the

Danielle Antalffy

what competitors. your pricing, from seeing On you're

Scott Wilkinson

speak. language see providers primarily, we from more, yes, homecare Price tends mean, I'll So everybody in you're I the the market. I pressures be say, competitive providers certainly the that the purchase mean, to seeing as else

in when about taking product relying if some an to they're what risk they're go on because providers, their said a have I earlier haven't question that back category changing product or on. a they Although model, they're business using you relied

risk there's that. in little of So bit a

more products. the on product think that, are quality frankly, of an run-of-the-mill I on there's delivery probably and products like there emphasis commodities, are So tanks than

So that's in driver has really seat. our where to us I helped that think stay quality

confidence announced product As warranty to from One, last in we that you reasons. own channel recall the our years that we in our had, the three expanded two business-to-business we And for was from call side we conference the five that quality, But domestically. we've expense value of offers that that thought minimal on side risk two, at tremendous conversion. of our equation. of that equation, other on side it do we out the takes and the their so of could got

part come success. a is price And model big while conversion, when price, our with of -- there's quality other of part a do things our So at think play. after than and big is I reliability people you our a got you've

Danielle Antalffy

much. so thanks it, Got

Operator

Mike Company. from comes & Please ahead your from Needham next question with Our go question. Matson

Michael Matson

questions. hi, the for on guess, Yeah, I situation. couple my had thanks just taking a reimbursement

or these XXXX, Bill with for to Inogen as was first, I that, neutral the So you of during introduced, And that, around given the to rental if do then negative what on that maybe? your they So on know, rural likely view help your BXB which this to less it POCs, happen you just expect around business; guess? could XXXX, still switch of it don't do thoughts are timing regard you might the relieve the that on on the would to some positive, strain your those thoughts other things. business hand, HMEs, one hurt hand, on I be

Alison Bauerlein

begin will them the for from There's XXXX. starting or going accelerated where have we've waiting don't be is I to that otherwise think the so to indications We an more competitive getting process Yes, it biddings do no with to process. them next need the we to so it round. see delay been to visibility, month hear tough two, point really bidding the But around CMS. they're bidding any additional been within

and that changes may what there closely are point. those we at out to be So watching but bidding to comes process, what we see on have any will the don't any be this there certainly if visibility

On competitive actual a more but the areas, legislation, side, oxygen the expensive areas. side as relief deliver rate bid versus we in us the rural it side do the -- on rural of on to rental is the this view to not the just benefit potential business,

bid areas of the the bid the same the done rates at we of areas the think oxygen that because and now So was adjustments do with non-competitive in that competitive XXXX. basically the are beginning

of urgency tanks, these time. and additional the while that that doesn't reimbursement that underlying giving to money take change it are that, And a POCs them a model providers, replace will business of to over little some better save dynamics bit so away does the

this we chronically is So we actually additional that undercapitalized. that, in the money that an business bit think them their that help may know little conversion models of is industry make because

it doesn't the in underlying that because a positive change tanks as So profitability see fundamental challenged dynamic are that time. we over actually

Michael Matson

being Okay, by from both Inogen thanks. through HME about -- how purchases is partner. driven your directly you've that BXB, And the then label talked growth and more private from

primarily had for you if any for patients hungry more how I rental sales much actually units of or I HMEs have curious, just guess, that know for those with because was insurance, I feel are kind are cash of Medicare, sales. being So used cash that

DTC be one through I the it but So HMEs. would of guess,

curious, you mean, mean, able they believe sales? it I buying is to maybe I are was you these that, just when cash really that do but determine them I or converting just So things, you're not see

Scott Wilkinson

believe we We've closely. are online they've resellers that rentals. those a online for used rights. of resales. going to job group pretty That's the HMEs. does partner, that their not finance sales done educational being got through on the our own of of the and manage help terrific so majority just access vast Yes, private out label territory programs this And calling outside partner process They've our got label programs. HMEs and to private have But of we

A at be provider a showroom their a them the label partner, for online sell in cannot through in transaction those that's the products could pretty one-on-one but small sold that amount. So for cash, least go private cash. sales

sales and So rental into the given that relationships partners' sales confident channel. vast majority private of customers the those the territory, own have are direct given with, the label our dialogue we with we're going that

Michael Matson

the of yes. cash getting the setting. of thanks, I sale was -- at Okay, kind the end in

what's So right part you that... now? big of don't think that's a happening Is

Scott Wilkinson

do to have how their their business really strategy but driving they've go-to-market referrals on calling and physicians that whole can, based way. is they love and not Providers I when that's where built their expertise. they mean, on

picture avail here. potatoes if to in have cash a they that themselves walk-in mix a that's sale, big to in interested make really they're going that certainly, patient while of that's the opportunity in sale, the So small

Michael Matson

my I just ResMed then offering, now question, what imagine, I'd they etcetera. is your point and at this are direction good connectivity And think you're software, final of are of couple of pushing understand. -- cloud admittedly, seems idea like but Okay, products your as as probably some don't too. that competitors kind a the And going

us can like confidence in-house example, up? being software well, for smaller a you you So headed feel that player I just I even -- capability given question something before but all can you've that give know That's in you've do and as the Respironics, direction or gotten one, this you set that thanks. ResMed got have, you're to some engineering maybe like

Scott Wilkinson

is capable program, so of us we the of when to revisiting that Remember, if we a weren't really important have start we back people that. try number robust to we going think one, had let helping wireless what got that's me your have you out launch right I got Yes, is value to I converting today what's assure can wanted right but all you're the that if a really my said price. product have you to intricacies quite and answer a the go with reliability for pipeline, I pipeline the product again. at are that But model; point providers. you

now. on preference continued well a So that's right focus what we've focused on. patient really burning and connectivity as for need We've have don't patients to

that think time. ahead are its it's discussions or on these having wireless the I seeing I front, that's that you're So think again, of launches people solution little a competitive a still

you don't at look right And that. that in have products think reliability CPAP. have to like other and I oxygen also today you've some that the price paramount do compliance requirements the in got are to you --

has current the oxygen, of wireless -- compliance, it it's in while without So program with really becomes solution a problem helps a and problem. very the it for ResMed robust CPAP

Now relatively in We've working place They're, do. be I think what do be absolutely call, have I'll so long-term products the there connectivity our for said you a oxygen, if also that that. why ready, are and engineers will past, and it that's will. that I that easy. I've connectivity that wireless we built in on would

arrogant, that kind I've really thing now. people don't think at I right are So showed have as We sounding a the far valuing. just think I said risk what we're that. And what we not some it's as little most guess, of to important substance of the ignoring the results

Michael Matson

you. thank Alright,

Operator

Our Martin question. & from Martin ahead go Associates. J. next Michael question your with comes Please Michael from

Michael Martin

and Congratulations corporate your my taking bit turnovers train, for about you tell thanks your you attract, share what's wondering I'd motivate appreciate color people, give how it? us that, a wealth, could and on us like, can you you was some call. the I culture, how if if

Scott Wilkinson

take one. me that let Yes,

to and tell that. our five according you digest company values So now, and are we right try what core and can they run you I'll

core pretty you decisions, core have in person's when It's found these refer tough what tough what when what call values, out have much values we you it's usually, meetings, and every decision if use obvious. conference we really to pretty every the we tell We decision room, desk. it's is in make in back a our you is I'll to I make, posted

and our people that and We that the our Number And So, somebody employees the embraces with one. first for pretty responsibility. to drive to that We open We're look number That's two look own of one is are results our for, manage and look and to we our expectations. what person plans is themselves. transparent communication. that's their self-responsibility. for them results type themselves. monitor

the in them if risk direct the rug. or of continuous communication under better And to sweeping valued under them that's don't each issue ignoring open We and is expect off, it We there's somebody transparent other. be we If confront sweep turning the organization issues, improvement. with even Number them directly. rug. an our three maybe than is

of to We improve area business year-over-year. expect every our

every productivity We goals department. have in

is goals organization. with productivity Staying individual. each have our in unacceptable We same the

for out thing; each service. and in lastly, to have honor we got and to a integrity. mover we our is commitments is year the passion other, do fast with our to thing. do day be You've in and better day up the out. And mistakes, right four a own year We don't you've and Number we motto got and getting easy

expectations, We to external. not expectations, are a for patient-focused look exceed of our business, opportunity all customer and every so but patient and we internal meet only

measure hires as the new five our company. kind in of model in far template use that for we leaders and to preach behavior for up looking what to we as that's and right going things, the company, that those the that that's we what young -- we're against, with behaviors move that's we're So

of don't we far As specifically turnover. some questions, your as disclose other our

in the it, sales direct-to-consumer you see with turnover say since in are said said center. typical in our have I'll a past, again call would We what though, our similar we've it

ordinary that's So the than of out other nothing we those there. disclose. But aren't that, there's that that's -- numbers

Michael Martin

Okay, and what use of kind organization? the do financial incentives you throughout

Scott Wilkinson

in not, participate And got levels, as everybody are. they're but everybody in everybody share -- they're that's great, in share able and a is we've prospectus to what program, to far different our But that those if bonus able wealth. in everybody outlined if hit share our try our the Yes, we going to take financial parameters as people there's and is results, that then is can together.

Michael Martin

your appreciate help. That's great,

Scott Wilkinson

you. thank Sure,

Operator

session. of today's like I question-and-answer end the reached turn we've closing time, remarks. any this for the back over at to call would gentlemen, and to ladies And conference management

Scott Wilkinson

to I'd close comments for few on strategy XXXX. a Thank you. like with our

on worldwide we and still We're We we preference concentrators direct-to-consumer the investments the oxygen scale. thank expect and future concentrators years. to additional oxygen increasing patients stay care of concentrators ambulatory the for costs X forefront next Inogen. working therapy to and emerging for industry, XX markets. innovative in of providers of non-delivery your reducing excited to the to at oxygen new convert patient a standard of manufacture portable we same model, focused We're you to seek adoption gain with our product developing United ways in to see our the about the portable And accelerate worldwide. oxygen to product in States, where pursuing the interest we're time, At registration in as becoming

Operator

do you Ladies conference thank and conclude for gentlemen, today's that We does call. attending.

now may lines. disconnect your You

Inogen (INGN) 11 Nov 172017 Q3 Earnings call transcript