INGN - Earnings call transcript Q2 2018

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Operator

Good day and welcome to the Inogen 2018 Second Quarter Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matt Bacso, Investor Relations Manager. ahead. go Please

Matt Bacso

participating for call. Thank in you today's

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

government strategy of As expectations on our incentive the available forward-looking expectations, law. currently our statements reports forward-looking call recent in growth about tariffs statements, obligation by and including that a reminder, to statements and international risks hiring and expectations, we based to in this as the marketing financial disclaim are second rate implemented any developments, beyond, filed information and packages, statements the Actual set forward-looking and presented impact for the growth these and are today and detail most in adjustments, and of CMS newly related may vary, will These are more XXXX, include involve forward-looking tenders statements, the be The XXXX Exchange may uncertainties prospects predictions for update Commission. guidance only regarding and manufacturing half Securities results periodic except with required in us. forth information XXXX.

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

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

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

Scott Wilkinson

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

the at say $XX.X proud of of strong generated million, revenue in quarter Looking reflecting all results record second our XXXX, of to I'm total three channels. we sales very

$XX.X and expectations, to million of Our second in advertising. our due exceeded record XXXX associated primarily consumers' of headcount representative sales direct-to-consumer sales quarter the increased

our representatives of growth effective still to is success, strategy is advertising as additional direct-to-consumer we awareness, this our sales. continue recent to hire in believe sales means to activities most our increase Given and to invest consumer drive

up of XXXX, is fact, In year XXX Cleveland-based from to expect XXX now we end employees our which original employees. target by have

of this XX,XXX Development and equates the we a expect We least to from Cleveland our quarter which package total from payroll thirds headcount, additional these $X.X we form to to next existing square extension, office X.X% million expect State third up of expect Creation a facility credit $X.X The two Ohio Grant Economic million in plan XXXX a years. $XXX,XXX first XX respectively. representatives. an additional of for Tax employees and in million space this occupy $X.X an comes incremental XXXX, to of receive Jobs million. the package With the headcount, at quarter Credit of of incentive Ohio, JobsOhio $X.X XX,XXX and With original added be of in to of receive the sales feet we

our turn, margin access our lowering optimal gross margin The we data a to routinely we curve that, Cleveland. direct-to-consumer price our by products, profile. We pricing to XXXX, total run completed to can we that structure the gross representative of quarter price, very are products and, develop In total in proud dollars. elasticity indicated of the expand for while are an trial. building in maximize We pricing demand the second also improving trials team

of June minimum system One XXXX, for As retail compared representing GX X, decrease advertised our $XXX $X,XXX price previous price or or point. X% GX starting Inogen an a our of to

direct-to-consumer announce that of recent we're based addition, In on XXXX the in Hawaii changes. happy third to sales we quarter began legislative in

for traditional $XX.X success million home Second continued and quarter due XXXX label domestic expectations, partner our equipment providers. business-to-business of and medical record our exceeded us was of to sales a with primarily private

we our business-to-business domestic lumpy the important and remain be this to can quarter-to-quarter. business success very optimistic While in proud that channel, it is the quarter second are of within remember

we an infrastructure and While financial due technology XX the think take non-delivery underway, this to still to from facing is we seven to challenges the believe will conversion providers, inherent years both perspective.

us, XXXX. Second first growth our from Europe long-term adoption in activity second Despite and with XXXX. believe the a sales tenders Inogen European oxygen ahead to as preferred portable to quarter of Further, half growth XXXX, and for currency the of non-delivery to reimbursement systems tender market due French liquid oxygen XXXX $XX.X from half of in opportunity international the million absence expect coverage a favorable believe concentrators see we the quarter also One exchange of rates. primarily be we the for tank GX in and will received the also solutions. of provider the was we transitions of in record major continued partners of We second of business-to-business there remain

supply our of output We meet increase to demands. and customers' team continuing are proud our to also chain steadily operations for

the quarter additional our and Richardson, early feet our in should operations square overall gives impact expect our tariff we to to from implemented most inventory of earnings the approximately by be Transitioning XX,XXX to on and notably, the feet. new batteries square manufacturing and first provide Texas and lease business tariffs in signed ion board components lithium expand subject excluded have July manufacturing on XX,XXX immaterial. circuit which and we stated space call, materials in recent been a to completed Chinese As newly for financial approximately significant the was Most footprint us printed total now space, imported list. This capacity products, expansion.

any risks. tariff our Going to will changes economic and necessary proposals and protect reduce we and continue interests new monitor chain financial to policy forward, take our the supply steps

X, resume XX-XX will XXXX the note On it the May, in topic extend We effective competitive noncontiguous the rural this not early to program. bidding through XXXX. announced December of U.S. areas rate and CMS reimbursement. In subject blended June schedule, would XX,

up increase an Specifically, XX%. of HCPCS representing code from EXXXX will increase $XXX.XX, $XX.XX, to

is non-retroactive areas noncontiguous the estimate, in Act, we this result for which As estimate will increase to Unlike revenue specific XXXX. $XXX,XXX is a accounts total a market. and rural incremental rental this we benefit, Cures reminder, Medicare in the which, of XX% of

for changes program fee and mid-July, reimbursement. schedule to oxygen proposed its Lastly, in current competitive bidding CMS

Specifically, on on the reimbursement composite set proposal current advocates bid. winning to was lead executed for bids based based the items, a system whereas

proposal reimbursement median at lead winning recommends setting bids. the for the the bid items maximum Additionally, winning rate instead for of

Medicare from the set is XXXX, With respiratory if may we estimate the currently DME X, of contracts any bidding. of competitive round to program regions, the next equipment supplier for Medicare-enrolled competitive beginning CBA the this under passed, new end account XX% therapy awarded XXX have expire XXXX, bid the of beneficiaries which until market. We of contracts competitive January current proposal XXX are oxygen receive at bidding contracts Medicare total

As of a reminder, XX% to not estimate we subject market is total the competitive bidding.

not proposed oxygen XXXX, rate June that CMS XXXX is place to will restructuring is rural undertaking, to be result for the XX, expect favor of and through December take not X, the bidding just they bid competitive round to addition, now December XX increased from Overall, do XX, supplier, winners. competitive concentrators for be any program patients XXXX. able communicated XX in who of next CMS in effective it relief, months. we extended we the receive are until In to will access bidding of the believe also portable

thus of XXXX. associates the ahead, I'm proud made Looking very progress in Inogen our far and

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

our we full $XXX from force, XXXX, CFO, excuse expect will Ali to to to – me in to continue guidance heavily oxygen $XXX up million Ali? million revenue increasing at to that, the million, sales With to range portable drive year invest advertising million, our efforts order and Bauerlein. worldwide. Looking concentrator in and are over call turn now $XXX operations I our adoption $XXX to

Ali Bauerlein

Thanks good And afternoon everyone. Scott.

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

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

and the second year. units sales Looking revenue, growth turning in Direct-to-consumer first at XXXX, the increased a of $XX.X our the second XX,XXX quarter XXXX. XXXX in sold due headcount of reflected quarter revenue streams quarter each increased in XX.X% XXXX sales primarily from the of same to XXXX, and of sales prior increased the growth representative sales to record our Total QX million XX.X% XX,XXX of expenditures. for QX of representing over to were revenue $XX XX.X% quarter up million, over advertising second total

second quarter second decline due period prior in over service lowering the X.X% in of revenue a in patients of the XXXX. a XXXX, and to net compared June versus of year, increased quarter pricing declined primarily quarter their Rental $X.X retail of QX pricing. XX.X% of oxygen volumes total discounts providers, represented Record of in XX.X% of sales of pricing revenue reflected of the QX the the X.X% increased X, Average representing HME due from XXXX. for Rental traditional rental in second of to of and sales worldwide in driven XXXX. quarter with decline to million effective and second from XX.X% adopting benefited up growth as million of strong XXXX in Record are benefit lower mostly rates. currency over exchange providers demand favorable and quarter tanks XX.X% the direct-to-consumer international XXXX Europe by million of private an our service XX.X% XXXX, prices more second in sales business-to-business XXXX, European concentrators with million quarter from same the XXXX same the instead from primarily in subsequent strong from of represented compared label to business-to-business prior the also $XX.X in We XX.X% increased and associated Sales the $X.X patients. in with domestic quarter to sales associated second direct-to-consumer XXXX granted the from $XX.X in XXXX. the period trial business-to-business partner on QX the year, oxygen selling of revenue XXXX, the volume QX was was second international portable secondarily XX.X%

gross to Turning margin.

For the The XX.X% total towards primarily in was second quarter rental was to sales total gross mix quarter second margin increase in compared XXXX. gross margin of shift revenue. versus to XXXX, favorable due revenue a the of XX.X%

in XXXX the partially lower margin The of was gross depreciation of per and XXXX. sales pricing direct-to-consumer and due prices in due to margin of XX.X% was selling XXXX in revenue was in gross by offset versus both the lower gross towards was sales volumes increased subsequent lower XX.X% due to primarily expense. nationwide. decline decline gross second margin to in mix quarter of sales of second and was versus channel XXXX. direct-to-consumer the pricing margin This Our in channels to average quarter The rental second increase in quarter trial sales of Rental cost XX.X% direct-to-consumer quarter second due the lowering the the unit. business-to-business XX% average increased

XXXX debt expenses. revenue quarter As primarily of to for quarter quarter versus to the $XX.X XX.X% operating XXXX, the increased expense our quarter hire second expenses million was primarily $X.X million declined quarter the second expense Sales expense advertising primarily of XXXX, in $X.X and X.X% spent This In Research $X million In due of expense the was in personnel-related tax expense to to of income facility the personnel-related to recorded and second million expense we second versus versus $X.X second as as or $X.X of million inside in in in expenditures. quarter expenses. XXXX. to the an by XXXX, bad in $XX.X and million in Cleveland in we quarter increased XX% XXXX, second and million $XX total second benefit period and to in a or $X.X offset increased due $X.X the litigation General costs. of second a million of comparative marketing million personnel-related of second in compared development $X.X second $X.X in to decrease patent revenue reported advertising quarter we sales representatives in of of QX million due to increased XXXX XXXX. tax expense, million XXXX increased of the continued million decrease in XXXX, compared XXXX operating compared in partially quarter the XXXX. quarter income increased the million of $XX.X administrative the at to of

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

increased In million, million tax XXXX, the quarter versus reported the the was of second quarter in tax represented return we primarily $XX.X on XX.X% EBITDA in million, to second due rate $X.XX income effective in million, an XXXX, versus quarter the XX.X% stock-based net of the federal represented second XXXX, where the was XXXX. XXXX of revenue. Adjusted common the in of the quarter compared quarter of XX.X% quarter the adjusted of quarter of second of increase Excluding per XXXX second Adjusted a U.S. on was XX.X% EBITDA which of net $XX the diluted XXXX, non-GAAP versus share revenue. a benefit, in second second the was of XX.X% XX.X%. which second of of compensation $XX.X to in EBITDA return of income quarter XXXX our reform. $X.XX second impacts $X.X XXXX quarter Earnings for

were of on XXXX. still to quarter of operating increase equivalents XXXX and As lower second XXXX a emphasis million revenue rental margin an second cash EBITDA compared second margin rental sales our of reminder, million compared $XX.X the continued marketable We and the in of was the $XXX.X expense quarter second XX, instead of in generated as reduction depreciation improved levels to versus securities quarter primarily Cash, quarter due XXXX. March XXXX of $XXX.X to million, revenue.

guidance. to Turning

year significant to million $XX.X to guidance $XXX We results. million, full We be market. a $XXX million still sales growth international total to our range solid channel, to up are increasing where expect strategy our of year growing have full domestic on and million sales be $XXX direct-to-consumer sales will for million to $XXX million, business-to-business representing revenue the rate, a to XXXX have $XX.X fastest- business-to-business to focused growth rate XXXX still growth from European versus the

We approximately due expect versus XXXX our compared continued sales be on down XX% rental rentals. to XXXX revenue focus in to to

XX.X% growth and increasing million XX.X% XXXX income non-GAAP to growth to income are we to from XXX.X% net up net compared range year to GAAP full $XX non-GAAP income million million. $XX.X million, to our of income XXX.X% million, XXXX to net of representing net $XX $XX Additionally, XXXX to of and GAAP $XX million $XX guidance of compared

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

expect forward, exercises. deductions, tax rate, XX%. of deduction, size depending we When option on taxes and effective estimated for our stock and million tax compensation expected from the $XX non-GAAP effective decrease on amount price quarter-to-quarter the excluding vary share including stock-based provision approximately from we the expect Going pretax to income, still benefit of in XXXX compensation of in income a net rate stock timing the

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

Operator

[Operator begin The Blair. Please of go William session. now Margaret question Instructions] will Kaczor comes the We first question-and-answer from ahead.

Margaret Kaczor

guys. Good afternoon,

Thanks the Sorry for about that. taking question.

all, So up there to had I of facility on sales follow XXXX. in first wanted discussion some of guys expanding you the the Cleveland potential through the on force

quarters, already we hire the look new on mean at out the as Given does And can that at – guys to you so same on as that second third then, doing that that few look space you’ve in rate as maxing are context, last and been original the you footage you’re we with you square bringing the quarters? in plans maybe at had? quickly, continue

Scott Wilkinson

I’ll I we took Hey down building. take – thanks for Margaret, that space the in Yes. one. question. mean, we’ve in kind that waves of

I space one building as said the things around has that is Now plenty of about extra it. it the of great in past,

looked we building. space hat felt So out place as options got And around run It’s of foot that we we no matter wouldn’t square and where a X.X the us. long-term we’ve at frankly, it hang and million on for what foreseeable our a space future. could growth building our grow, that, we in rate,

we it until So can we pay take we have the don’t if opportunity, but it. down need we needed, we space, for

that’s that is up a the had blocks less are fact that now of full. to that couple we down the indicative taking So space, yes, we of space or more

period the three-year about while X/X of any people. that that have XXX over or bit call a we expectations we running are over communication to communicated And would schedule. ahead them of didn’t original expectations expect XXX hiring be our pace are of think That’s of our in period. we increasing the the versus we this well year, we own would a people was XXX as our why the over that ahead people, ahead plan I little that of last numbers specific We personnel sales as that and give rate three-year forecasted

kind we of updated why that’s number. So our

far out. a and a I still us what’s don’t huge vacant. around is building relatively As I Like small space said, run in as space, footprint expect the to we’re

we good question rate that is on continue could to a your hire Now one. at

could originally expectation our mean, I think you it’s rate until than planned. try. that had higher you we know we one don’t at certainly, that is a I hire

think far, a job. we’ve great done So I

pleased very of personnel to We’re we’ve the quality with that able been attract.

past, As also and the in that of centrally recruit side is building located, downtown. we have can the from an from mentioned side in I’ve of Cleveland Cleveland, pull the really the location east side the advantage west and south the the so area we even

we I area continue as can have our standpoint, given market that maintain people as in rate long quality POCs, to that long as success we long criteria. think from saturation hiring the us invest at such a we’re from way gives recruiting and will that the the personnel, as of we maximum sales a continue hire a we’re meet in to force going to that,

Margaret Kaczor

in now may a seems. major making kind it, you the it you very of have guys one be helpful. few And trials, in years Got row. This pricing a this pricing change of is the these then following trial, of terms done first

this increase a this talk much did what volume to to want of that make change? see maybe actually time? different was us make you So would you How

Scott Wilkinson

made change time. back $XXX changes in years the a a tweak. is we really, relatively of go several blocks made we time pricing Yes. And at would ago, if call In you I this the past, small it,

price If was the channel our back $XX.XX. you in way go retail ago, years XX

to that to dollars. down demand are. where not we equation our is cost, in but factored only So the we’ve margin maximizing total all product gets Part of also stepped

which things the three months the XX do three-year So years, a change. about move made for last is we XX a trial, tweak we times period to we’ve a $XXX these every last over two relatively that such because small roughly hadn’t a the months. But run covers

we that’s new said guidance a So all what as factored far stated. we increase the do data as already tweak, that’s into that in volume the should made small Ally

Margaret Kaczor

what that for And a that is this Got and understand tune market would guys that. one that But it. large of that’s is you last I little maybe X fully referencing the change I talk change. a players one But see and indicators think bit? you your the make adopting bigger kind and appreciate me, this XX-year And keep don’t And much maybe about could you a know. you maybe picture. in

us you. know. let Thank You

Scott Wilkinson

Yes.

So and refresh the get that Unfortunately, we from I we mean, data. that penetration the year, would fall only main look that next would the annually. is data this cover at metric the gets be of Medicare updated rate The data. XXXX that

sales. number So drawn of last of I for a cash couple be certainly, to from in the growth understand think capture we’ve us the X.X high really that curve X% were rate. the a what will key kind years X%, here as from all that doesn’t a But to admitting moved that, that said, we

We’re year. from rate historical, point probably we’re and unaccounted growing it which curve. a market faster XX% a cash in, ways off than X rate But still a way quite to incrementally the those percentage grows for. more the much sales we’re X.X sprinkle such still if in from points saturation of long a if the you that only at Even and are penetration a takes end back

spread. of game. probably there, you this Sure. reason to in the estimate somewhere we kind game, past exact the three a equated curve Might a in a gave is that that’s baseball of And range. But there be the certainly, X XX we’re that we inning, it six also that best reason it’s first I’ve the science. X-inning range. in is think the of that not I if Now this we’re it some years? kind air and be the XX noted innings to it’s signal be our on. of game, Sure. then estimate And but one And an in said years? the range a it’s Might best in to could years, that inherent second

to So we’ve continue of go, got the force. reason long sales the to we another growth a way invest in

Ali Bauerlein

Yes, to the just conversion POCs, still while on couple and and through everyone them lot of remind seen their there they’re to just finance last in to that we’ve the to challenges channel, of bit, to want a a acceptance I time from of expand work business, well. that great how they years for as is business-to-business going going conversion convert are this over particularly how

certainly believe them We’re main will trying is future. their of care business significant in why to POCs, the think with fully change of it them should transition. to in And partner time really become we It with be still the that model. though help a still HMEs that’s take and adopt – reason it is a still the that for we the even – lot it standard do

Margaret Kaczor

Great. Thanks guys.

Operator

comes The go JPMorgan. Robbie next question ahead. from Please Marcus of

Robbie Marcus

is the about I for of does talk business-to-business. lumpy, the could Thanks you This look really full it hoping can that was it’s taking of in adoption direction the question. sustainability one here. but like moving Great. be

be would So and is rallied players, could what the in, understand sustainable middle inning adoption players? better the it And the And Thanks. from terms what what your term? is, really opinion? to like here I in the larger smaller people are in near of sized in we how think

Scott Wilkinson -

we’re you inning maybe if inning, of first second game, will. third we’re the I in, the but – inning, in the just think the third previous that mentioned It’s in what certainly, I in question

conversion. mean, far there horizon of standard care as over think As game type that’s because POCs end absolutely a that will I and seven will time of question, I we years, sustainability, to XX the the be is that a be believed

this lumpy. still their Ali sorry. cash I’m question, be Now mentioned to they thought success, that manage another and flow, the heard accounts I got though, just a I got we question, there’s so can also great that stops. despite continue their Yes? manage starts to to providers different have restructure, can reiterate challenges,

end continued way. curve. we along look believe lumpy will you to standard if it and POCs could think to But I period, that the that the we’ll absolutely the be the of So get be care, over of

The customers or way priorities things cash we flow with in they’ll pretty their things individual have hold a other on pleased nice We’re thing is see smooth when that has see slow of a a is pretty business. customer the It’s that there really curve market now, but don’t to been because management going moving, put so are when that. to down, and the far. whole here you

Ali Bauerlein

just we and did And the increase both BXB side, the of a the side. that on on a Yes, significant the seen but on obviously we’ve growth do seen side, expectation performance certainly, the direct-to-consumer guidance XXXX. toward is guidance contributor to also substantial we’ve

Operator

Needham. question And next comes ahead. of the from Mike go Matson Please

Mike Matson

and it POCs to I’m not of sure how is you competitive I the for put but a I direct. guess or do perspective up a appears order how just thanks – that, start other they’re direct Hi, wanted you anything be advertising Respironics can my direct. website taking view that them like to questions. from some much going with doing that news around attempting They sell to things?

Scott Wilkinson

Yes.

really still that change consumers really product product, that been to bidding. difference sell think have like how doesn’t you design, are things our there We resellers it have important patient-preferred are is been anything you’ve directly But about against it doing and quiet most other because product. themselves. with think along is you we stacks the And starting our is so that ours. product, other as So for got and unchanged. on believe the I for value The still it on Respironics sold runtime products, that focused if against we Internet competitive Mike, they’re the several up same out It’s battery the to retail know, patients. several years the guys to fact

leadership we that’s market in think approach. – we’re position because a of that believe, I why that’s

is nothing as still, there. market help The We full awareness tanks. really changes versus that advertising they’re selling POCs of this So fact leader. POCs. investments until actually penetration, of believe some to the that make a Fundamentally, in direct it’s could drive us get game you may

whether does believe So helps POCs, of it’s that that another anyone anything we Inogen manufacturer awareness benefit us. there, will or out drive

Mike Matson

Okay, on regard going quarter. about of price we just maybe saw with to cut in only And how sort then impact a the the month the helpful. revenue business, your I guess forward? in and wondering we growth that’s the DTC should June you impact sales Thanks. that implemented margins think

Ali Bauerlein

Yes.

that pricing So clear, pricing so curve. run when can trial, we ran the appropriate prices draw be we to with the trial, actually, so the happened for we we in it the pricing actually run pricing trial, April lower, what May. And much and

actually, for in direct-to-consumer you profile that of the full in gross saw as sales the margin lower side said, secondary a on And margin business. channel. the the was the impact So lower we quarter, gross pricing

margin So of gross did in the quarter have lower actually you should improve – it from select pricing here, for states. because two months

of what margin So margin profile going really saw representative heavily remember, mix you the And is as was point, forward. another gross just dependent.

on has versus of mix a large BXC our margin. gross BXB impact So

guidance that is so why because it there don’t dependent. specific is we And give so mix

Mike Matson

Thanks. Okay.

the confusion. for Sorry

in June thought price for place I For entire the some quarter. that been hadn’t reason, cut a

bidding, you it’s But of potential – on switch incentives maximum on question the on just in would I reducing future commented from possible go final your that the then any to business, think of So do impact just eventually I given rounds the that have you for my the bidding. guess think BXB to that the reimbursement change to competitive to median on actually and changes would could tanks? to POCs know wanted through be from HMEs the impacts up

Ali Bauerlein

sure. Yes,

a think certainly, I possibility. that So that's

bidding price a you range that assume know price. a higher is will the future and strategy bidding that also would median process bidding would than maximum But don't be what do You strategy. what to bidding

So they reasonable That potential a it's hard than But maximum a be going bidding impact see think rounds. it's strategy. to that to future what know bidding I pre-competitive will we're do I be to think likely to would that strategy median were going said, competitive think back higher that what rates on don't it's bidding. pricing

could increase scenario that potentially XX% you in be even think about rates, in would large a a – you talk you So rates. where it's see when a increase I XX% or good

doesn't versus tanks. of POCs fundamentally, change it, However the dynamics

of to in make able the as business And may additional to the so funds that, give just a equity little conversion much because or debt actually it. investment providers of without it actually be do their bit to

actually them because of it that cash higher, both the ability bit the of also financing, So but to could were accelerate P&L, POCs conversion. improves improves the extra their if which a gives the rates to do get little adoption

Operator

McKim Please JP ahead. Jaffray. from The next question go of Piper comes

JP McKim

the going variable. Hi, good you advertising you price, spend as a on quarter. that wanted spending advertising if the markets? pricing as I'm on does with to and forward? trying Meaning, high wonder the price guys not included if something – to up So congrats you to need be I the lower follow that at strategy afternoon just did what going need did Or you're you the is to on advertising this And balance in you'll quarter. – forward. in cut you those look the

Scott Wilkinson

question for for rates expenditure margin. margin It's comment elasticity where Advertising you for quarter. to close maximum develop in cost the total your and a equation. at margin and Yes, you thanks on and that JP, look you analysis is and not price then curve traditional thanks the included optimize

is capacity advertising sales based the we have. really on developed that Our spend

you enough of can't advertising, got reps to So drive all because lower leads to up. you've the fill

that of the we or advertising have they more number leads a reps, completely on reps they spend because advertising mix upfront leads heavily the a it's on reps need as pipeline, they pretty have. analysis. new to these reps, than So on equation why so because is don't seasoned have you completely more longer-term And need seasoned of and It's many the we different new That's based versus different. upfront. equation have But reps rep. also a

JP McKim

your price Okay, it, is that walk have down and XXX quick support to you over your can't more? demand? support walk would then guess curve I the because time I down it increase you question – back to strategy in Cleveland, come that a that's down to but people office given don't if you have guess drew, this, would the had, price you in So call

Scott Wilkinson

curves Those independent. No. are

So the of price optimum sales capacity. is independent

JP McKim

on whatever internally, a players expect can your more about POC of to it, call larger one the to of product? And been entering kind connectivity more systems and little hear potentially ones next When you. GX. lot There’s we just call about some then Got it next-generation, you’re bit a going more the market. smaller gen talk from

timeline where hear upgraded is gen about product. your of in features and around see to and next your want connectivity we’ll when thoughts just more list So

Scott Wilkinson

for closing kind GX You’re it calling GX we We’ve But working we – been comments. are years. my way. yes, on of the and by will spoiling two

will We the connectivity before XXXX. as talk are but GX well GX in of today, not ready about our we plans talk end detail about as to

JP McKim

Okay, Thank helpful. you. that’s

Operator

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

Danielle Antalffy

good afternoon. congrats taking so and Hey Thanks another quarter. the question guys, strong the much for really on

versus dig how outperformance. These a new direct-to-consumer maybe obviously, has been of on reps wondering that – are previously that across bit or I’m of even going productivity because, it’s reps rep some Is you’d is any on? new faster productivity greater to the there are of of productivity down either better Just much wanted these expected. the ramping reps new sales to those reps either organization. adding that just little addition the contributing

Ali Bauerlein

Yes.

is So the sales with the factor. is additional primary impact associated secondary a so capacity, rep productivity

of the by number facilities California seasoned Texas reps, the influenced improved seen facility. and course, new have is so We across but is that the productivity Cleveland have in heavily increasing, the that facilities, that of reps productivity

employees increased their not year-over-year. primarily improvement, of capacity just and base with looking total really, associated a the a if So just number increase productivity how you’re changed has and productivity particularly is the of at the

Danielle Antalffy

then as how customers on versus of well. much follow-up was can Got there entirely strong to purchasing more it. And but the growth a customers new BXB, guys know POCs? transition existing it question just you if making don’t comment, I

Ali Bauerlein

certainly of both. is a It both. It’s mix

reminder, as But label volume portion our partner. relationships. just a good a of have We does private go that through

label So both private customers visibility also and really buying to we’ve And even nondelivery product we we and buying existing implement the their customer seen perfect more patterns, on customers use partner either of buy don’t expanding but seen deciding new product. have POCs or technology. our exact have

Danielle Antalffy

Got it. Thanks so much guys.

Operator

comes Matthew from go of ahead. KeyBanc. question The Mishan Please next

Matthew Mishan

direct-to-consumer the to flow you taking Are through see Cleveland questions you and opportunity? congratulations the nice that products in or for Is services some you to longer-term increase Thank quarter. through solely and the could a reps meet on potentially Great. other people starting in channel? the in Cleveland POC

Scott Wilkinson

Yes.

it's now, therapy products. right just For oxygen

model, on So a that the little a Like POCs, POC do the do we we want. really have the what primarily, manufacture. on than stationary concentrator market. patients other our That's we focused products also different other

smaller attractive it lighter quieter, so it's home. a move uses footprint, to less patients, around So to that's much And power.

that it's therapy on products So we only. sold focused as But oxygen well. now right

product we would a today, in we a great direct-to-consumer if our just look pipeline. not unique in line But products to with And home Now and think sales other advertising for match this for and patients see our for other conducive go-to-market do that the team have solution that be that built would but put only and to products. equipment. response we medical that screen products therapy we've criteria they're a this disruptive a longer-term the the to is certainly it's strategy direct to diversify in great serve other more do selling That's for approach oxygen strategy products.

Matthew Mishan

And point some or meeting – this as next gives like production meeting or demand the the as you is Okay, into capacity visibility full far backlog there great. Or the develops for that at are so? quarter goes, good as pretty product? you

Ali Bauerlein

chain, demands ops customers. Yes. the supply well We’ve a good job as the keeping done of our with our as team up with

demands to sure we continued that inventory we've our meet the customers. of can expand to our So make

no is the there So pipeline. backlog orders in of significant

Matthew Mishan

Okay. Scott Bauerlein in Cleveland. and Thank you guys made [ph]you be mostsuccessful much. the team very

Operator

remarks. our concludes any turn Scott CEO, like would now to the to This Instructions]. [Operator conference and question-and-answer closing Wilkinson, I President for session; over

Scott Wilkinson

for of Thanks. second of care portable of I’d ambulatory concentrators we patients about like as comments to oxygen and few look become to large oxygen market. future standard excited therapy into XXXX close in XXXX. and worldwide still growing We're half and expect the this oxygen on the to a the

to development, anticipate fifth We end year. generation product connectivity portable concentrator more we invest sharing by continue in plans this on of details oxygen and the and our

Inogen. those thank participated who today's I'd in in to your interest Lastly, call all like of and for

Operator

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

disconnect. You may now

Inogen (INGN) 7 Aug 182018 Q2 Earnings call transcript