INGN - Earnings call transcript Q4 2017

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Operator

Good afternoon and welcome to the Inogen 2017 Fourth 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]. is event this note, being recorded. Please now Matt Bacso, would like to to over conference the Investor turn I Relations Manager. Please go ahead.

Matt Bacso

participating Thank for in call. you today's

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

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

our posted these to filings the in have of We historical presentation website. financial information. Please refer for fourth in the investor quarter statements Investor detailed Company's Relations section more

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

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

Scott Wilkinson

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

fourth Looking sales very strong results million, total we the great quarter domestic domestic of at to channel our reflecting say and direct-to-consumer I'm business-to-business of proud results XXXX, revenue in in generated channel. record sales our $XX.X

quarters, by was than our total the revenue As in the expected offset less of represented we've which in more XX% than revenue increases prior quarter the in seen in channels. from rental decline revenue sales

record direct-to-consumer as sales most located steadily our of Our expectations the in exceeded Cleveland we in of facility. million inside sales representatives XXXX new quarter new added with fourth our $XX.X

reps of represented inside of consisted Our XXX direct-to-consumer as an XX, our sales which of team XXXX sales XX increase year-end reps XXX. total over of December XXXX

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

with direct-to-consumer of from and sales in in purchases also $XX.X by we trial primarily ensure providers. medical quarter we've our a priced. driven our XXXX home done growth equipment partner expectations As to domestic million the private are execute products exceeded past, also plan business-to-business our channel traditional to in Fourth optimally this pricing label

and providers Inogen concentrators turning insurance they to reimbursement their see turn portable the leader reductions, face to We to costs continue traditional to in lower the are in operating HME as the of oxygen space.

European in a flat in due of the year same tenders growth mid-teens partners third and to the in fourth any XXXX quarter. our limited XXXX, fourth quarter awarded international off which through were growth to primarily quarter first strong major period the XXXX results quarters While trajectory the it's over provider sales three lack last of

orders that sizeable quarter Lastly, creating included South from fourth XXXX Korea XXXX difficult didn't repeat fourth of a the comparable. unit quarter in of the

to total see communicated can long-term oxygen have offering Republic. concentrators outlook of of began oxygen we quarter our ahead and In preferred We XXXX the stage. business-to-business be as quality demand past, our in transitions product the liquid concentrators this That manufacturer, activity support contract European Foxconn concentrators in systems at oxygen in from service increase said, productivity, expect to as remains located opportunity XXXX, our especially expect of tank quarter-to-quarter. International, are we sales, portable a portable that majority One vast lumpy preferred In in the a support believe to sales we customers, Inogen pleased of very Inogen produce Czech concentrators ownership. XXXX their our patient with to we to continue Europe required as One we tender we fourth provider cost, a low using of GX of the large for cost the remain production Foxconn, and non-delivery market of As to solutions. we the expect partners in optimistic and and our European adopt and European GX

At manufacturing columns The and for sieve our the operations One and facility focus continue One bed GX. our We product, at California. at Foxconn production Inogen in assembly maintain our concentrators Texas, to concentrators activities and facility Inogen expect Home U.S. latest Goleta, will our allow on to our Richardson, and us compressors growth on manufacturing Inogen to in capacity assembly redirect our domestically expand our and

relationship While already still levels Foxconn, service costs. with and delivering improved lower in we are our early

schedule Top XXXX When in only built into XXXX. it's rates a that went January was CMS on stationary that December for concentrators EXXXX. X, to updates; under effect XXXX XXXX item reimbursement XXXX XX Medicare released the and items, Turning comparing HME fee change code saw the

will be EXXXX average on compared rates. XXXX in and to indicated in For both, decrease rural suppliers non-bid XXXX the areas, other X.X% for

competitive coded rate additional that await these to change We will to believe providers applies include pricing the stationary change to instituted As billing who stationary a in are has POCs on these the an not revenue concentrators. affordable our adjustment in areas regards the and non-delivery receive With continue impact oxygen oxygen applying a concentrator the interim as put in code to patients to we final is budget areas solutions HME CMS and since pressure utilization that to rate a The areas rule, increased will rental EXXXX. rate. rate concentrators reminder, convert provision cut this the decision. neutrality of does dual due to also all still bidding oxygen impact Medicare to additional

which This Protecting of for no extends XXXX' support provide to big extending XXXX. HRXXXX reminder, rule to House of 'The bill. provide has Independent X, bill final Act XXXX with Home relief Access the a XX, interim titled Representatives, non-competitive interim XX, XXXX approved, there is while retroactive this through XXX January August through to areas from if and would voting rule, timeline the from As XXXX, December known areas in co-sponsors, retroactive relief is bipartisan would non-competitive also final of on XXXX. also Bill XXXX December X, bid a the to bill there

a on On the that competitive sent await report CMS of the XX, XXXX from nothing new Congress budget of and on around included information we February That to on President round competitive topic language XXXX, Trump bidding. competitive said, proposal next have bidding bidding.

Specifically, based suppliers eliminates a own price. program the amounts. the amount bid their proposal under the Instead, bid pay winning bidding that the single competitive at requirement CMS median payment on paying

bidding. in $X.X Even to proposal, XX bidding though areas competitive on all estimated view competition government is save including expands only to proposal The on believe will competition over proposal this urban which areas. Additionally, this than the of years. areas in the rural administration's this specific context those rather it in areas billion provides a we be based was country competitive

be it final portable is significant in provisions the still will will competitive it these pending unclear While non-delivery still in bidding continue we concentrators. will XXXX, oxygen or reductions reimbursement believe if oxygen budget providers impact like rates drive if to round to solutions the XXXX included

Finally, on proceedings provide CAIRE. an with the update we wanted to legal

As one infringement a reminder, a alleging filed on XXXX against CAIRE Inogen September in lawsuit patent.

CAIRE out value patent to alleged, The CAIRE amount and $X with to covers all in Inogen of million. and full in of to settled from first free the with the both happy paid past an insuit. rights We settlement was court future litigation recently to all-in are announce upon XXXX respect agreed of damages for quarter be

a to remove the settlement timely the wrong our and maintain in and of best the prolonged shareholders litigation. was we agreement committed we a distraction of we uncertainty, doing, Although Company expense believe no interest

with market invest and As market patient our to and maintain products. our leader, defend oxygen portfolio POC in to we position the the plan in R&D preferred technology patent

especially manufacturer and our during contract I'm progress expanded ahead, associates we and of European our quarter, a Looking when time up ramped Inogen team. really proud sales a this direct-to-consumer new our significantly

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

now $XXX full our worldwide. million efforts order our to operations $XXX continue drive adoption in our we turn and call sales from to million, million, invest marketing POC heavily guidance million year to that, are force, $XXX the Bauerlein. XXXX, in will CFO, I range to at Looking Aly? to $XXX revenue increasing With expect and to over Aly to

Alison Bauerlein

and good afternoon everyone. Thanks, Scott

XXXX our remarks, then I our updated provide fourth quarter performance, guidance. details my financial XXXX review on prepared and will During of

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

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

in opportunities strong growth major mid-teens lack European partners in primarily trajectory flat due limited the XXXX tenders year, first quarters provider to the fourth office the prior quarter While any seen were in to of of sales compared our X which awarded XXXX, growth quarter. the results international XXXX the third same in period and to

fourth again the fourth Europe robust of selling Korean and business-to-business private traditional XXXX. the towards the a average in international XXXX South home Lastly, for to the XXXX, Sales of primarily same volumes sales in XXXX. quarter million million XXXX, XX.X% in that to fourth of beneficiary. medical revenue sales in primarily versus the of the prior saw XX.X% XX.X% from total year. of fourth the label quarter Rental fourth sales, in of from the in XX% over We declined $X.X of shift of With worldwide. $X which quarter in did quarter representing of creating X.X% a fourth fourth quarter represented was with order XX.X% and with repeat the associated difficult business-to-business quarter decline XXXX the the associated in the benefit [indiscernible] Medicare quarter periods year, the million additional revenue providers, in not reimbursement sales the the revenue due prior increased XXXX of a retrospectively sales due rental the in fourth quarter expected of large period in rental the of the revenue the included XXXX increased comparative of the quarter discounts period prices $X.X same compared from in XXXX to up fourth decline fourth quarter XXXX, of comparable. represented in Rental some equipment

the quarter margin of quarter gross of the gross compared contributed of million X.X% XXXX. total was total gross to Turning which in fourth in to the The the to primarily Act recorded fourth Cures margin benefit was the decrease fourth $X total to quarter quarter XXXX in XX.X% gross for due XXXX, XXXX. of XX.X% in margin margin fourth

the sales associated Our XX.X% and towards lower the lower selling quarter improved with in decreases gross percentage gross partially which $X fourth of of XXXX of in was the XX.X% sales in The Cures rental margin primarily material of in recorded fourth mix direct-to-consumer fourth by increased average Rental in to versus prices. gross the XX.X% offset in XXXX to The was unit, goods of the sales gross quarter costs, primarily XXXX rental Act fourth was declining sold of contributed margin benefit improvement in fourth due XXXX. due XXXX. gross quarter to the the XX.X% cost quarter million per margin XXXX. versus margin to quarter mostly of quarter XX.X% fourth margin

marketing increased XXXX for increased was versus of $X.X or million expense, in XX.X% administrative in the General fourth and product million operating in expense quarter the expense of XXXX. year versus XXXX Sales full of to quarter the to increased to in in of million and expense the of August the million sales after million in the increased in QX fourth period of due $X.X quarter Research million as As the comparative versus net compared $X personnel-related personnel-related revenue $X.X $XX.X revenue of expenses. quarter quarter $X.X million or $XX.X fourth quarter and additions development in sales and XXXX, due total majority increased opening as compared spent of due the expense $X in of of in Cleveland advertising primarily we XXXX, quarter expenses. XXXX the to operating expense fourth the XXXX, primarily XXXX. the hired million recorded primarily marketing the development expenses million XX.X% XXXX $XX.X to to quarter In in of XXXX. million advertising we facility XXXX, fourth force and fourth in higher rep fourth $X.X to of fourth to

expenses effective to of the on litigation associated quarter five While with settlement quarter our in the $XXX,XXX the expected forecast given legal over In XXXX, CAIRE XXXX remaining settlement to spent to the be original and fourth patent settlement we've litigation $X.X of years. of amount primarily we've taxes income expense asset. compared reported $XXX,XXX of fourth less X.X%. total the rate the with next for rate when XXXX the rate for was our The CAIRE. XXX.X%. amortized timing provision the totaled provision The increase representing effective revaluation million of the is representing provision $X.X an our income income tax with $X.X expense deferred In million of an totaled quarter tax tax tax fourth non-cash in tax associated of effective due million tax is

based in Our million taxes for included compared effective million quarter from tax fourth of tax stock the to XXXX benefits rate income in excess $X.X XXXX. quarter also decrease fourth in the related compensation of to recognized provision a $X.X

the the XXXX. was In income we rate reported to of net quarter XXXX. deferred fourth million fourth benefits, fourth expense quarter a the XXXX and of in the quarter based of $X.X quarter XXXX our effective of asset of million both $X.X compared Excluding tax the to in non-GAAP tax revaluation net XX.X% the XX% loss stock fourth compensation compared in of

of to Our XXXX the primarily $X.XX XXXX, $X.XX deferred share the quarter reported net assets. Loss the in of of expense was tax quarter associated fourth the decrease $X.X quarter revaluation fourth of with loss negative versus in our per million the in XXX%. diluted was positive common due a

was million, Adjusted securities revenue. an of fourth net million of asset $XXX.X net revenue. of million Excluding income $X equivalents, Cash, XXXX quarter $XX.X revenue. million which XXXX. million quarter of revaluation of was on represented X.X% EBITDA increase non-cash in in XXXX fourth the net September increased or quarter the expense, XX.X% income in XX.X% fourth was Adjusted EBITDA were cash adjusted non-GAAP quarter XX.X% fourth to in the XXXX, return compared return of non-GAAP marketable return million, $X.X on XX.X% $XX.X XX, the versus as the on million XX.X% of represented million quarter XXXX of return $XX.X where versus where fourth which revenue. and $XXX.X a the tax XXXX $X.X on income deferred of EBITDA or we increased fourth quarter Non-GAAP delivered XXXX the

guidance, to full from total $XXX $XXX million million revenue we representing growth increasing to to XXXX Turning are to for XX.X% year $XXX $XXX million, range year guidance to XX.X% full our million XXXX of results. versus

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

in plus We on XXXX versus to XXXX compared meaning continued or rentals. our X% due relatively sales focus expect flat, minus rental revenue be to to

As stated to to decline non-competitive monthly known areas XXXX reimbursement X.X% in only C-schedule adjustment. changes are due a Medicare previously, in bidding rates roughly the stationary rates in

Given code, GAAP our the to representing income million XX.X% XX% net increasing tax to income non-GAAP million income GAAP $XX compared compared net up million of of million, to and guidance full of $XX corporate to $XX XX.X% changes $XX from to million. net $XX non-GAAP to XXXX income $XX.X growth to U.S. million, XXXX range growth we of are year XX.X% XXXX to and net

results. a to maintaining for XX% million We income full XXXX to based representing EBITDA the activity tax stock in versus growth guidance lower taxes estimate provision to $X compared recognized will income the statutory tax effective lead in would benefits decrease approximately million U.S. our based of rate. a as on stock XXXX which that rate adjusted compensation $XX million to range in for from taxes of to of XXXX forecasted We are $XX XX.X% excess related decrease for full year provision year

our decrease changes to in an effective rate tax due the for estimate of million in approximately XX% from expect corporate taxes provision we $X expected income U.S. XX%, of tax code. down the previous in Excluding XXXX,

We on sides net our timing compensation stock quarter-to-quarter and tax and vary on exercises. stock pre-tax depending effective the the rate of expect of to including deductions income amount option

Lastly, the reinstatement not exemption. the impacted by retail Tax Device U.S. our Excise we're of given Medical

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

Operator

from The first JP with question comes Instructions] Morgan. [Operator Marcus Roby

Robert Marcus

than were did well I in to came sales they that million, almost with think the I the people wanted XXXX; channel up more you direct-to-consumer reputations at $XXX start roughly to expecting. XX%,

So can how in new historical into rates they growth and mean in what the been correlation growth reps that you talk forward? translate might what sales in about has adding sales from the going terms And 'XX DTC channel? of

Scott Wilkinson

You're right, us. we opened, than past, for did it's office in Cleveland we once the we more little a heavily have done good hire a market have the been

same you are community, new to the excitement We saw and As might thing the the imagine, of a is a it's there little when a lot to we early easier in we going, Texas facility. opened hire.

half possible, we the so the backend last mentioned office new folks to was comments, we in X in in beneficiary we more of kind still a hired is that it Aly her year, Our of than of were And traditional year the approach in office. our that's that throughout the Cleveland a linear had of were approach the little months hire as the as want so hired but the loaded. fashion as

call X or sales inside X kind to to stacks steady sales to of what end state growth, -- to as drive curve. rep a far their it's of for rep As months and up we that get

and our we they is month before two -- that, good will but in end spot that's curve guidance this like X contributions we're X see they reflected year. Now a so to some feel months, basically in and we of in three contribute

Alison Bauerlein

channel. sales in has correlated It direct-to-consumer sales overtime the growth with that closely

how in know, that with our side as additional additional that So capacity we associated we we've to sales that of limit direct-to-consumer months capacity new consumer capacity that those X would will growth you first much sales outside to that have. see creating expect have to increasing hires that really growth the on for X because awareness you tied is added as sales investments us you

on we sales plan XXXX direct-to-consumer continue additional plan sales So as well, and drive add way to capacity, we leads we add of do reps going spend in that going and the more more to to the as into sales to long marketing fill that's we're still from well our as side forward we business. full a capacity that as saturation

Robert Marcus

expecting So in continued should hiring 'XX, first be half be second rates to we DTC than stronger with growth half?

Alison Bauerlein

the is given see with travelling. in than typical colder months demand Yes, summer associated business patients stronger we we do months in think when in the that you the that that see the are seasonality

still as level sequentially saw have, in our on However, XXXX increasing convert is could reps also in be back that you of half in warmer we we as sales basis of XXXX leads dynamics throughout to results in when as in XXXX, with well. is big that XXXX there XXXX, expect be into the underlying you are we and even though capacity of also months of that timing when XXXX sales then true that direct-to-consumer XXXX, a throughout and impact fundamental expect the hired at the a sales sequential was increases direct-to-consumer actual true the so stronger saw

Robert Marcus

last flattish was this it profile Inogen? it it do I think return took in growth it now Is year, Thanks. sell a business business roughly guys think terribly with here. to you year, -- your hitting trade fitting the you can't way probably hit there imagine this and or outlook is this monetize here, because rental your else As business or that any fantastic someone forward. How is flat to about it about going

Scott Wilkinson

go Aly has taken that. channels to and I had mean, as a rounds competitive headwinds but this year still the have you're in past on in don't Inogen there with are in no done we rate significant we'll job clarity providers year the that competitive rate rate as be reductions as be of but kind we've have bidding good it on of other reductions through see the grow had right, it don't all with reductions, we the continue that in pretty will the we to forward; challenged. will past bidding, included so there and so This future, we've the we've said, our

don't know, out us quoted retail we've standpoint. we X for conversion be with ten is for POCs want our a us you the set from POC know, we about -- difficult that future And to work set up standpoint is side given deemphasized are if haven't what from patients to it's we better that think into still get business does if continue screen at to which it does opens navigation you do of to of bounded them product that it their to POC set able completely we've XX through a think provider we those to want you and but other to want in a out, their access to homecare our take patients although use up It a and them the up to to walk strategic because become to As to us traditional about or go better it going their build to it, will believe sell we I years because talk out, we way somebody a more to that expertise. partnerships a resource everybody there a from benefit out some model. happen providers footsteps, understand always you that help to If a conversion it will so non-delivery and years.

do least see rental we still in long-term oxygen at therapy. So, as our future

long-term force sets growth. But But expertise we contributor with the drive see what that it Now is once with the other than POCs need for other probably, able disruptive up does rental hasn't as sales we in important partnerships leverage that forge. it's we've products the of that company. term conversion positive been been knowledge to strategic we hit to the then can a opportunity still and an right, point you're a short that still back the we’ll that and fill

Operator

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

Margaret Kaczor

the Hi, Thanks afternoon the good taking questions. and the time guys. for for call

is a First of market maybe channel. the one question me by relation adoption POCs in to for broader

which having about market up You've point and maybe year the before talked kind taking share. still this at is of from share you're XX% XX%

didn't us So competitors maybe coming market in growth through XXXX? from have a that competitive environment is or DMEs is it maybe, just from out that with share can POCs whether the you we does from and walk from where change presence it's the other go through peer as previously

Scott Wilkinson

Yes, it's is mean clearly share other competitors. a Margaret. good our question I gain coming from

POC is correctly, Now you and our estimate well other in the we've overall if share last growth But said share market growth couple you gain. That’s at as look from as over about from we that to coming forties XX% from that manufacturers. years. moved gain low

Margaret Kaczor

POC manufacturing, how see mom-and-pop some of the And so, blue-chip all? POCs to and you at as from coming you in if do look kind of that going more XXXX that XX% XX%, at that change so is or

Scott Wilkinson

to have are stronger I say marketplace some in your because of manufacturers exact am and other data I than what Yes, I’ll there's But several I POC going others. answer don’t the logical a with answer, it. kind question on mean

products a have others. a some have than better sales force, stronger little Some

the know were you players. logically, So weaker taken I expect would from

Alison Bauerlein

Yes, and just add to to that.

to had great relationships we all But I of creating think also with a label showing that we've private more really up that strong as us consumer XX% has in we've the almost non-delivery. ramping last really DME’s partner our sizes allowed of XX% consumer invest with that demand been have the benefits inside and in awareness. or also sales year by partnership our and team and

are also being aware of you POCs and So, and then our and more have consumer the you us more Inogen and sides both demanding both POC label with have we working overall private for is product figure both providers an worked has the and market. penetration partner market convert class out us how see well their that as what in in marriage to driving with the that business to best really on who

Margaret Kaczor

it. Got

conversation kind So, as of bit a further. little take we that

pure you as as kind gain But is much POC split of at be the how versus you solid for for switching BXB just DME anything growth. that in gain growth able gains that you look of up your XXX is domestic of adoption order basis to guided are share traditional market to XXXX, to in to patience into us you go beyond XXX of the then market? of points share And Thanks. guys you access a you think POCs. Our your assuming guidance product. Meaning can

Alison Bauerlein

Yes.

[ph] that one. the continued Really apple from take assuming adoption we're I'll community levels what So, HME that is been seeing. we've

to adoption, penetration we we've major aren’t in POCs continuing incrementally XX% years. of order at POC a to do Inherent change that and guidance to that in XXX market seven that material said in point share reach penetration to percent to increase category acceleration level. assuming or we to any penetration expect and basis assuming our a as accelerate we’re ten is not has over and or in full of while XXX So, it time so

conversion don’t As believe past, ahead make we where of will guidance we get BXB while sure we’ve the on out to to. the side, said our we that look and in the market get the when particularly market we passionately want at very

system. market get with BXB of from there non-delivery today side. so that to just a are on years cautious for guidance system we’re as actually don’t that tank-based we its been for and want the know many to lot get is the that also and now, providers and more been out a of conversion public ahead where We challenges implement to they a Inherent we’ve

to it you where do seem expect as system. we just non-delivery the conversion because like still solid said, many has there Although are started does players based growth

Margaret Kaczor

guys. you, Thank Great.

Operator

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

David Saxon

this on Saxon afternoon. Thanks our questions. Mike David is this for Hi for taking

Scott Wilkinson

Hello.

David Saxon

Hi.

wanted And then around you're any around thinking the little a you what business. point markets get Just more to international particular? to color in if can

Scott Wilkinson

had. key the Europe. Yes, shore One is position distributors when up we the we May improve that something largest said year Systems we was couple last recall will today and service that market in It's really our things did short-term of to if our bought States. to on MedSupport one be already in you continue focus customers still our frankly our that a back outside support of of Europe. We to the United

became business their for their also As these continued increase. scale part of to a to customers service and budget their with bigger POCs continued it expectations

shop alright, we shorter to repairs it people said going expense set drive gives their language partnership So, direct lead the basis, with time. in acquisition. It’s pond that And have big an things pleased They manufacturing down also considerable do from to Foxconn preferred that the are and for so contract the keeps call, think shipping expressed across through amount, time grateful can to in the us executed very shipment the our in up can provider that. talk their so time on one soil tell opportunity we position that own small going Later in one customers in some avoid the a the our that I or zone we're but appreciation, there you shipping us way for relatively that's cost. we're own the the people we with will European we Europe. of cuts started lead another, customers that are year, I key the that Europeans and to key that we

our improved So and again, focus there in-service term. the we've short competitive that's position

out we you a mean look a be China said long-term, way out then huge theoretically shouldn’t China and If and market. XX-year I way like horizon

right as long got be and that a therapy that improve Today portable that's but is population there's percentage In no continues so of retail develop but would not years, are That's for opportunity. on for that trajectory we will You've a smokers working long-term next countries as healthcare expect registration there be oxygen China a growth over now usually a term large a the something poor-quality longer-term issues, of the to going that our China, it's could we established. large country develop. so play. couple change opportunity, so short-term systems to in growth reimbursement

a of versus focus. that short long-term hopefully kind So the question your term answers of

David Saxon

pricing some you've helpful. I pressure to are products thinking anything that's ResMed Yes, about Mobi? coming then then you if just and And this market can ask year with about heard just competing what if

Scott Wilkinson

respond ResMed to Mobi. and I’ll want You on talk

Alison Bauerlein

Sure.

in years, been particularly the built to and do we’ve guidance on over pricing expect So, we when small couple higher selling us be to price the able side average compete of product with last to as we very over side have patient as seen versus as decline the a because time for of starting that both prices maintain we to the well competition, business competitive the BXB into approaches is point pressures, and to with well. already that competitive preference of That we is as sensitive bidding we a continuing is volumes look premium would to translate our is standpoint. the pressure This expect pricing from industry a a side that reimbursement pricing, value and we the price see as manufacturing common reliability increase. expect into continue perceived at

continued able XXXX. into So, guidance. model to our we our to expect pressure we maintain ASP to that would be But going and into build have into

expect volume out We we to continue expect costs be lower offset ASP labor to into here, and able that and be that to able to pressure. cost add we also to as materials continue to to take leverage

Scott Wilkinson

Yes, on specifications. their the know still Mobi. don't anything about ResMed We

comment anxious specs It's our just of lock hard and understand on to we're So, get as in better. down actually product can with how you the until compete going the one to to it's you hand. all

any ResMed launched we a its them we’ll few around. go So, test do out and product competitor, or anytime we time a anybody and there's we're whether yet. not those there and What of by that is do buy this new other

as I to one are that the of to and it's I to continue going products going people think we players, do launch mean other well. whether expect or we’re new ResMed

to key work because now are the we I GX plan seat in what’s there. product at We day it driver much about It’s that preference the on put us staying haven’t us ResMed, I great forefront blue-chip about they keep really for are than what though product is say hard tell will company. our at we will a patient of success. other to don’t started really launched and after and innovation the our of and said we that’s believe development today GX, that and about you it much

convert that with could POCs, and well credibility to one help is therapy I add the converting POCs. POC opportunity us to a going and to real to in the Right not benefit that faster rate And as in as our thinking future the oxygen leader. market converting another. out tanks they the decent now, continue product is a think could at they market could actually in

down primary of well and market to who the tanks foreseeable our road we But that for get growth. the end the see changes. future, as competition or for opportunity dynamic than as converted Now has the really as we

David Saxon

thanks Great. Well and the quarter on for congrats the questions.

Scott Wilkinson

you. Thank

Operator

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

Danielle Antalffy

Hi guys, A questions. much for so again. profile great afternoon. taking really the time. Thank quarter good yet over on the business you of question on Congrats a the

I The penetration for then significant you numbers you I’m has there don’t for I thinking know business if know as imagine fit it talk So, me I room talked was ramping know bit penetration penetration I XX% XX%, lot what to that be to to in? approach has part to and can of call how expect and the continues going over even a Scott, forward, you put XX% to out HME you've a to where just so much. about about if we -- your that would maybe Thank change direct-to-consumer mix margins see Ally, little move curious, time? you specifically in to your And and a the could and the I that market said mean it, penetration. XX%, of you to today. POCs wrong I'm would that tell past and that, XX% That think for move to am

long Sorry question. the for

Scott Wilkinson

good Yes, it's Danielle. question a

to of there's of many as I think answer context current that'll lot get me little the so the point frankly it's a would first in because to when market conversion therapy, we just be are think POC their it's are in it's unit now, from patients sell a I'll if also as holding hard they're over change you different. picture POCs we there But freedom. on oxygen price But relatively opportunity POCs, that when it it easy less at business oxygen retail said therapy, look time somebody our big providers where robust. Let that the have provider. put Right a because if dragging to tanks all a money we the they call around, a using are

the could play swing more rental oxygen in context would will a providers bigger therapy oxygen and a it therapy, role certainly the in standpoint, So, again role. future play of from an prominent the

unique continuing overall built we've Now very outstanding this to in selling our business, means are needs. is and sales that that what It's force adept. products that is to build patients have

products in be homes. to that even in unique need does it people, in we necessarily can got But sales backfill with but portable be won't not component in that more business. unique a we've solutions necessarily oxygen offer products strong that people's products disruptive continue unique may So, have, be retail to solutions respiratory, It to we concentrators. use to so our can serve to that

deliver we today, are that which We’re FedEx partners acute company an not products using care and can UPS. easily focused delivery our

our to takes truck fit deliver unique a model. that flat-bed doesn’t Our solution probably

disruptive it'll opportunity a balance balance spot change really at careful you it about up time think there is a to sheet or I've what products. to but make But that all partnerships I now, year, very at looking our the between oxygen, and distraction. and And said form So, will think we’re does us acquisitions with sales those that great I we're for time, last in year to products. other look to we're respect frees either say because when a half the delicate I is that add over is right add

where the today, look so not picture will so our opportunity still what are what years, today the team that's I to XX on. sales patients, that's of we're future oxygen painted we a convert focused using in while And like is

Danielle Antalffy

at where sort incremental new you're to be Just timeframe really that's of before any in move-in point about multi-year talking clear, that oxygen penetrated? far is we're off, a therapies; even

Scott Wilkinson

slowdown. starts think to -- growth POCs our that we through multi-year Is before

Alison Bauerlein

POCs first high in very long-term added company would more getting us and the as opportunity the net the changes, being between at the it as future to basis, we the and the market business and operating opportunistic for side are be gross difference nature very a so on it margin something be mix margin growing similar foreseeable a And the your on oxygen we've business growth market right is back large profit question time. to direct-to-consumer just market; in expect the if operating impact BXB the but if thing along and still side, therapy primary margins the profile. the and could We see right for came

guidance to continue the that and profile. out kind and a sure where margin So nice don't checks of any it capture that profit focused making gross and similar topline operating the on but necessarily the in opportunities also expenses, business that channel we work can on the we we're P&L operating the as between have out depending and looking shown why very gross margin will profits and as of to sales opportunity many grow sales on leader give market those in and we if more that that's there we is are

Operator

comes next [ph] Jaffrey. question from JP Piper with The

Unidentified Analyst

follow-ups Just me. two for quick

pricing. on bit guidance, up, you revenue bit did trimmed went market First, on I a great numbers there, although little rate a didn't in and to get the want growth get just at between little the you the that ahead you of dynamic, mentioned the range look changing the quarter. a posted

in walk if making there for some has and next outlook is Just through conservatism Company of the just year? the we that specific in changed pieces growth numbers curious, those here? something could Thanks. Is the

Alison Bauerlein

growth put the we initially. guidance when is basically expectations had The same out we rate

XX.X% it of it's So high now low to XX%, end to guidance, before and was the XX.X%. at XX%

think growth we've then seen So made set on side. just BXB plus it's the the with the where we investments the that's I up of the ourselves to same, came that success business we XX% us, so also on we've still side the see expect that and and in; nicely materially the direct-to-consumer to rounding

also the are the wouldn't because the difference of there I level, that very want cautious in any still early earlier to yet just So I conservatism the however, more history. haven't seen year, we are you year and in in is say enough we are say the that we

we've guidance understand that we we're very used, success bottoms-up with our we feel approach range much pluses to more good about the really the guidance very a growth used we've while sure and and direct-to-consumer rates, our philosophy So budgeting there. to and potential control making the minuses in of

we than range that and able put out putting that to is tend be to greater more out on we XXXX. still there numbers tend to is do us to we in think achievable cautious achievable So we guidance and visibility the side have do be business-to-business think where this guidance it's important for we very for

Unidentified Analyst

wanted hiring apologize is missed frame Cleveland about the at in the more broadly, range? I've up overall that just that's I within specific Whether that target sales And this. Secondly, is force demand a where the Company a we or I bit in it talked what -- pretty But percentage rate would of at one within is the increase Thanks. would range, target? Company set if it specifically? ballpark to figure,

Alison Bauerlein

Cleveland want said in reps. are sales have the the about to that over the of means We of we up have putting over net in facility facility, XX were Cleveland off being X months hires, and in that with them facility half that facility in XX of said those the us place; that overtime at least add half in people XXX we of them so first

XXX first still capacity so what overtime. us see we have -- capacity for off together, but to we the capacity sales to understand need productivity get sales on may we that how hire understand we market start putting with like -- depending to lot of overtime may very solid XX% we us of on is is, side the but add results. to a is over that So and to our hire more get now there of feel the that force increase a really number sales ability sales -- there and If additional this continued there, to first where force gotten through or room look for

Operator

The question comes [ph] from Sidoti. Ramgopal next with [Operator Instructions]

Unidentified Analyst

me if Cleveland different Scott, in can would would give the a be sense sales there example, focus color in be a California, going force what's any there for be geographic you terms of or with versus different to appreciated?

Scott Wilkinson

from in or got the that distributed of sales of done We've assign everyday and we've are gate the all we they across over reps. USA evenly force. out inside to more leads is, One the territories things the right less don't coming

team really month. not the is get it's X going we assigning new your is, if sales leads more us the territories scaled sales for almost rep because territories, the So sales every did to made of way about number to By manage every easy territories, have you we to think really every got you've the way it, rebalance we've scale month and team. recut then it

country, is their So every scale. over USA territory month they inside the easy the and are it rep, getting all leads makes all from it the

Unidentified Analyst

ticked the more be you in that that in even quarter, know advertising was wondering I fourth you Aly, about I just intend on you're aggressive front? terms highlighted how to expenses a little thinking if up XXXX for of

Alison Bauerlein

Yes, do. we

we investing when pool, should advertising is a higher we ramp, saw months number have of of that they that media upto use the quarter, in X more reps new percent be expected I leads, when X they expense new productivity actually so we and are in what in million, $X.X increase have in that the to field. reps in more in time to you did when an want that As see there do high in fourth highlight

was a pool, the newer sales So that and such of in proportion the of capacity you reps in main quarter. that driver increased fact had the high

given And to the in also sales reps. reps into expect going we the increase invest sales team, that spend we for both do heavily so continuing to but are the existing XXXX, fact new advertising that the

Operator

over Scott question-and-answer I Wilkinson conference would This remarks. to concludes back closing like the for session. our to turn any

Scott Wilkinson

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

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

Operator

conference today's Thank presentation. attending concluded. for has The you now

You may disconnect. now

Inogen (INGN) 28 Feb 182017 Q4 Earnings call transcript