INGN - Earnings call transcript Q4 2018

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Operator

Good afternoon and welcome to the Inogen 2018 Fourth Quarter Financial Results Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matt Bacso, Investor Relations Manager. Please go ahead.

Matt Bacso

in participating for you today’s call. Thank

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

hiring recent for As expectations forward-looking estimates periodic development our hires the detail forward-looking statements growth are about statements, financial in including statements, in and a reminder, forward-looking required statements of growth impact the regarding the obligation These in this uncertainties these market information update of One that sales most growth, on results forth in tariffs Securities results, to to and we marketing – and presented expectations and the XXXX strategy guidance today international expectations, GX, as based and are disclaim beyond, the product filed expectations, may Chinese finance vary, launch Actual involve and call will statements Commission. recent by available except currently include on be risks impact may XXXX. our of set for the more Exchange forward-looking any and upcoming the Inogen and reports law. with The information us. only and prospects predictions are in

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

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

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

Scott Wilkinson

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

a of the at quarter Looking the XXXX, all robust XX.X% growth fourth of in primarily we fourth and results sales increased fourth four rate consumer $XX.X of total reflecting million and $XX.X quarter XXXX representative to the sales due generated associated Direct-to-consumer channels. of of revenue in increased solid headcount advertising. million, XX.X% revenue XXXX, quarter over

team represented of sales Fourth domestic quarter December reps, million. over $XX.X approximately direct-to-consumer increase increased consisted XXXX XX% our to sales as up of an XXXX, XXXX reps business-to-business of XXX Our which total XX, inside year-end XXX of XXX. sales

the in While did provider and business-to-business strong quarter home one due order grow, activity demand providers XXXX. traditional continued equipment medical of from home fourth national to by Internet slow sales primarily to resellers, care

strong provider, Aside this demand we national home diversified saw care base. customer our from HME across

rate when fourth domestic at quarters. Specifically, previous the XXXX, business-to-business national sales in of home business-to-business sales the of provider, domestic this quarter roughly excluding increased four average care the

million. business-to-business strong to in realize. non-delivery technology conversion sales will and business-to-business at barriers, challenges very infrastructure an is sales providers quarter at from the five due said, always continue it facing is have important perspective. believe remember Despite to process can quarter-to-quarter to be we least $XX.X and Fourth take inherent lumpy fully more to international these As that domestic financial years the we natural to XXXX were both

tariffs X.X% pleased we million, very for rental Transitioning was our quarter China service, until declining revenue of we more this amicable cash first both the direct growth quarter quarter. and of revenue rental contribution XXXX, of were we European is business without of work quarter the acknowledge fourth Chinese any our demand since $X.X the agreed representing the increase fourth While XXXX the focus December as rentals on or the toward to tenders robust existing the retail of subject the On to away Fourth shift meaningful deal. our comp XXXX, in tariffs. to increased have growth XXXX, of to when U.S. postpone sales. trade sides began see easiest the and to from toward compared fourth March quarter Xst any quarter a in patients In net XXXX X, XXXX. to face new in

increase X, refrain March the to increasing XX% materials to tax to billion and import Specifically, U.S. products. on effective China X, from President from its effective from decided January XXXX. XX% XX% the of XX% $XXX Chinese imported February XXXX on XX, delay XXXX Trump

However, no this and reached no long was delay last. given how has for official deal timing trade will been additional

around of for revenue applicable range issue, Chinese listed. materials. Included sourced goods level to tariffs guidance assume in guidance these to our cost the the of continues sold $X our in the an increase on Given global XXXX uncertainty million is this of XXXX estimated full impact

and Inogen expect and product standard Connect, GX the remote Inogen market the out preparing the obsolete monitor followed Inogen Inogen the launch. a and our to to domestic still the we protect complete, launch, planned February to GX Connect concentrator, With to United provider new concentrator our weight forward, discuss GX, by to term. the oxygen We us than be minute away updates. size when launch such the policy economic business-to-business smaller battery android expect features GX flow in user we troubleshooting, higher oxygen continue we the transitioning Apple oxygen XXXX by and of with in in health will the the to oxygen functions, evaluations efficiencies GX remote to which notification of six model. oxygen the portable Inogen will concentrator to through market. tariff direct-to-consumer patient oxygen over patient forefront the product of tracker highest roll platforms, One includes portable pound Transitioning anticipate channel of a XXXX. and next Inogen will than oxygen through at business-to-business oxygen available keep our other to channel, necessary flow cost in GX in the half interests oxygen compatible One Connect drive settings will and One and like intermediate as development, material We also for GX are delivery Inogen purity held The currently GX changes the of We States. platform financial currently with will for business-to-business preference in produce be operational GX. believe therapy market, is location through to portable as have status, I and than the domestic such launched the home the homecare from included milliliters XXXX would in the by will briefly our software still the checks alerts the GX believe new channel. Going We GX with first expect first then rate international the currently at generation and direct-to-consumer steps the risks. discuss channel We the and providers is Inogen Connect connectivity U.S. One distinction want tank FIT a channel GX and mitigate launch Inogen OxyGo will equipment take for features the in followed December run GX I Inogen Similar per the GX to One One any XXXX. oxygen supplemental Further, any we proposals GX GX. continue output devices. our time, support per and the find

As you U.S. Internet and practices of growth the on the resellers. been know, have there investment of community therapy market the some the certain of oxygen many business questions long-term our size of some members of from recently and

and our cited reviews oxygen felt a I Before to reasonable on. like the therapy long-term the report, results, data a bidding, for source after competitive issued, XXXX to WinterGreen head in changes U.S. the wanted was issues and were particularly address long-term in comment rates. occurred number report result oxygen which nationally have of was applied on previously had Ali of financial these I’d market growth as we a Since rates market therapy XXXX.

publication changes have updated that the the its data following Medicare the of occurred we on age more have from Given recent recently based and the sources. market October, our released the view report, market of

from data U.S. data, Center basing estimates source CMS, there of Foundation, While Control own Family our now current Kaiser data. Disease no we internal are Census, long-term market and market on is single therapy the our the for updated the oxygen

make reasonable, the long-term we certain which While view believe it up believe oxygen this of information assumptions, us requires market. are date we therapy a U.S. provides to more also to

retail low account cap While Medicare few in into we was the to in continue beneficiary next And for private taking single base decline trend Medicare in XXXX. the patient XXXX, digits and shift to overall expect a when growth sales Advantage, years. data believe showed the insurance, expanding we that that the

growth exceed patient other difficult the which contribute POCs long-term we for believe However, therapy to growth market will are quantify, rate. factors to there are that that help oxygen overall major opportunities

rates for pay Medicare issues Medicare have First, access in reduced new is competitive enhanced requirements, grow result the created both as caused a and and the coverage and market, substantially which and existing reimbursement other bidding, patients. reflected not of to factors data, billing cash

above believe combination factors five a is industry the the years. growth POCs tank POCs. rates the for of deliveries the to rates Additionally, overall market the lead growth We over next conversion long-term should these major plus going through therapy from oxygen that

these seriously. respiratory the are subject home by and XX with heavily frequent audits maintain we provide all we the and and licenses products FDA regulated license to Medicare take Lastly, in care accreditations accredited to and law compliance to an states, provider

meaning home resellers, today, we and also important our accredited on home care applicable in the abide practice in is by and care specific Internet sell our authorized resellers combined, Medicare Internet none which common material We our are as all suppliers, are they enrolled as of freedom also compliance well in their variety they industry than point do most want commenting resellers about our not as Internet place accept customers them and other patients cannot providers from for bill less Specifically, not most believe testimonials total and as and independence. that It’s our requirements received competitive Internet this represent how lives resellers, Internet to without resellers any regulations. not laws of up we on and a that have revenue XX% Internet and resellers XXXX. sell allow that resellers have our of We Internet market of a to greater note variety products. Medicare. changed POCs regularly, products I are out our to also we

the have led some therapy it their out While rather dynamics some products even paying better patients patients using oxygen options, means insurance reimbursement if would of receive seek in pocket. benefits, to

patients’ We customers and our a that can lives. proud we are these make difference in

XXXX, drive With call to a order adoption to portable continue operations Bauerlein. growth make force, turn worldwide. now advertising to we Looking our to high our to over at CFO, in expect Ali? I investments concentrator efforts Ali the the company remain and will sales oxygen appropriate that and in

Ali Bauerlein

afternoon, good and Thanks, everyone. Scott

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

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

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

direct-to-consumer are of we given XXXX, the where We growth increased proud year fourth the achieved in sequentially. difficult of comparable the in quarter prior sales the

resellers, over business. the a this in $XX.X quarter normally is Internet from looking When sales reflected our reminder, XXXX given customer of growth traditional business-to-business the XX% million reduced mix, impacted at from but home of As not seasonality strong one and saw XXXX. care we negatively QX Domestic QX by national case providers demand of in XXXX. provider HME the were orders fourth

of by business-to-business quarter in rate average and Excluding million at from home in the the this previous International fourth domestic mostly the increased driven volume. provider sales XX.X% domestic European QX four quarters. strong sales of XXXX, care XXXX roughly business-to-business business-to-business national XXXX, $XX.X sales increased was QX, of

from adjustments. growth a XXXX. per unit of revenue versus from quarter the the total higher of net $X.X in price. foreign Sales the increase period XXXX. rental revenue direct-to-consumer While revenue per by on exceed compared million Europe of tender sold fourth the X.X% XX.X% represented due QX XXXX, of representing to XXXX, in the with of Rental rental X.X% fourth prior sales growth the headwind of $X.X increased was and X%, to of Rental our our expectation patients primarily XX.X% non-CBA rate over in quarter the sales, prior despite XXXX, XXXX X.X% went on quarter demand year same same fourth primarily of in due revenue quarter comparable mix the the was lower X.X% This by any fourth XXXX to of which from the service. million year, up period the selling the patient easiest effect revenue revenue continues offset service partially in to of in June average higher activity exchange decline into increase quarter in a that have in quarter XX.X% absence fourth due increased the of XXXX represented in fourth rates. in international Sales to and of in

Turning to gross margin.

the quarter gross XXXX. in margin the to XXXX, fourth compared XX.X% quarter For of total XX.X% fourth of was

and margin versus XXXX. was favorable both mix quarter domestic toward was shift Average June direct-to-consumer XXXX. sales favorable of gross direct-to-consumer average of gross XX.X% higher fourth international The gross The margin partially Our and cost sales. the channels for XX.X% due the volume, quarter business-to-business in to lower by XXXX versus increase in in pricing margin offset exchange effective selling business-to-business the in lower sales mix sales was primarily fourth prices increased a X, due of goods quarter the accessories. to compared to mix rental increased where additional tend XX.X% on quarter configurations in increased was fourth the expense. service, increase quarter of XX.X% X.X% was margin XXXX fourth in due sold XXXX depreciation of revenue lower quarter direct-to-consumer of per rental The gross gross unit Rental in increased fourth fourth to the versus consumers in patient XXXX the primarily of XXXX. also to buy per margin, and with

development XXXX, expense XXXX increased expenses. recorded to of fourth $XX.X and product expense, in million of operating the quarter in quarter quarter to expense increased at personnel million in comparative personnel increased million hire as development compared of expense operating XX.X% XX.X% fourth As increased we for sales related to $XX.X total to infrastructure and the $XX.X increased planned $XX.X advertising the $X.X due revenue invested XXXX, of in in to Sales of Cleveland to increased XXXX XXXX, facility growth. due inside support in and versus quarter expenses or primarily in or fourth versus related in fourth of related advertising our Research primarily and as and sales expenditures. revenue the to the fourth the XXXX, we $X.X to the million continue million quarter expenses of marketing representatives million period personnel,

of was XXXX quarter quarter $X.X of income significant of for a was return In income and primarily when addition as reps fourth which million first of $XX.X XXXX of cadence, to were But million revenue. as and reported an compared by sales expected fourth increased million did the not which XXXX, quarter debt included a in hired sales of related investments quarter in we reduction health XXXX, was insurance in deferred quarter income these in $X.X on mid-term tax full expenses we where to the well the the the quarter of XXXX, contribute plans patent revaluation we the productivity strong spent reps in quarter million these in XXXX, reps In fourth we expense due third due In the XXXX The to XXXX to advertising provision XXXX partially in inefficiencies expenses terms X.X% QX, cost due sales asset. which our of quarter advertising. a defense fourth of media for administrative the reduction the bad increase million infrastructure rep a sales in productivity. $X.X at fourth million $X.X primarily reps new decreased quarter million have in which of the Operating to margin In expenses. their is higher with versus versus revenue. of as of most increased reps the cycle large or tax to fourth in compared income operating benefit quarter as quarter on quarter $X.X in $X.X quarter General the million XXXX. XXXX, declined was in enrollment. $X associated tax of target. personnel, income expense these $X.X election and this million XXXX, in fourth operating and reduction by fourth expense, reach X.X% the to we tax in believe the XXXX, $X.X income related Operating represented compared million open $X.X an fourth of to of to created related personnel non-cash million, the offset return X% expense fourth XXXX, XXXX fourth

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

Excluding fourth XXXX fourth XXXX, federal reform. the quarter U.S. XX.X% XX% tax of tax to the our of expense quarter of of a in versus of we compared XXXX. was income asset XXXX September marketable in effective in Cash, common of $XX loss of due benefit, the deferred the fourth non-GAAP the Earnings was the $XX.X tax compared in $X.XX million, the quarter and of common compensation fourth the net in of diluted net primarily $XXX.X as versus $XXX.X increase both of net securities revaluation GAAP the share diluted impact million million of $XXX,XXX per XXXX. million share quarter fourth reported an stock-based per In equivalents cash loss were quarter XXXX. rate quarter fourth the and to to XXXX, GAAP of $X.XX XX,

Now turning to guidance.

channel reiterating range rate. full are year to results. to sales be fastest revenue of to guidance our growing to million domestic We full year $XXX versus expect of business-to-business our XX.X% representing solid We XX.X% and business-to-business international sales have million, and XXXX a XXXX growth sales total $XXX direct-to-consumer still growth

we providers, in first the XXXX we focused revenue the with still European reduced to see we continue grow given growth half sales HME While improving be comps easier. large markets of in expect on primarily our from in will activities traditional the provider, order XXXX. half strong Internationally, XXXX, modestly domestic business-to-business as get expect from we of one to back period-over-period demand

the X, standards bad XXXX X.X% to portable we in the rental be require general XXXX oxygen expense. and cut in XXXX rental concentrator accounting change effective revenue expense associated a to of a continue instead and grow adjustment January the of rental in spite to lease additional rates debt Medicare to compared to modestly Lastly, that new with administrative reimbursement expect revenue

for million $XX due income down year to million full $XX.X a for to million our decrease guidance $XX net compared reducing $XX decrease million. of to provision XXXX tax $XX to income stock-based excess XXXX net a related are in When GAAP to XXXX. to in to in rate from exercises income stock in benefits is net recognized to GAAP compensation price current million, decrease This from in We range $XX taxes income from estimated provision million expected the million million XX% compensation, approximately the expect $X estimated and in taxes expected deductions, benefit our income non-GAAP stock-based fewer excluding due we tax from $X XXXX effective of from option XXXX.

results. $XX We XX% are guidance representing full million, year operating reiterating million income our to growth of $XX to range versus full XX.X% of XXXX XXXX year

net of Scott our that, range XXXX also to are We in guidance XXXX flow million representing additional plan. and year $XX of to full happy I growth with your XXXX our required be year capital operating current XX.X% X.X% full expect meet questions. cash to We positive results. take EBITDA adjusted no million, will reiterating With to versus $XX still

Operator

Instructions] begin now Our with will Robbie from comes Marcus session. Please the go [Operator We first question-and-answer question JPMorgan. ahead.

Robbie Marcus

for for spend little for Maybe minute sales a BXB of and to quarter some the distributors Hi, benefit you BXC you actually so terms business the in in well doing down of taking with get is composition in sales? the bit as purchase you’re speak of thanks on could trends POCs up and benefit of a U.S. and a underlying here my willing of picking slowing more the direct-to-consumer the question. the maybe you quarter, the to this second seeing

Scott Wilkinson

is four down rest consistent to that quarters mentioned channel. you’ll with a of Yes, continuing major they the slowed Scott. customers take that at we in the buy the that’s a are customer that there previous I’ll the with note, We mentioned start their that I’ll we’ve HME channel. Robbie, that But BXB seen if that it’s rate one. also purchases.

it’s highlight of customer to in nice some rest to to down So rate. the and market. we’ve wanted wanted what’s in a going we hard the continue when while because nice got on rate, we understanding total growth give large And on to the purchase diversified growth a they purchases, ignore customer, at them that a slow color base, the

five the So the years we continue expect that market as that’s we part to one will next over convert said. and POCs to

rate customer the up of year the down the that quarter the at their much the first and half third started large fourth might last fourth they and we that heavier though, when a of they slowed the don’t bought at look in of in and they to how XXXX pickup. shape XXXX then things purchases, you really, and customer the – quarter, quarter slow If end know will in

about try we Now, our specific individually, to story always customer talk I tend tell instead to somebody any not like else’s of story. to

let happened So the some the at struggles me in kind more frame that a level. of out there of of market macro

You’ll by HME always note channel the community HME that that are these why why that said why, more the know folks and conservative? lumpy very is that your purchases little we’ve restructure are because do guidance difficult. people facing they’re it’s generally always to Well, lumpy, want think you challenges there’s are a in

If have with and to at of cash tend issues you the more the to capital. providers, look providers, smaller flow spectrum they access

them, for the buying POCs money versus for to so tanks And just struggle buy is a them.

the no scale gives reap if economies delivery of capital, large, benefits their a the If home and players, specifically tend of exercise large built access more the non-delivery of They’ve and businesses to those but those they your model. scale, that provider, to won’t them don’t to you infrastructure business, you restructure we’ve daunting. tear then having other cost national by that the you care restructure of efficient to spectrum, always efficiencies the go of out much larger economies and end successful have said is and out matter

some a think well. It’s the conversion, a going our isn’t take We’ll here as lumpy, this there stops it’s sales overnight view continue to reasons. and many we we and we’ll and point. five or a but be this least can for always we’ve see that’s market and that think starts said, to it process be various it’s a to doesn’t of and from we’ll the will go what continue patterns say So through long-term purchase process time, years change one-year it struggle that year at an

And over opportunity – really you overall don’t that a people – business can cash any creates data issue our find, on prefer us. market a driven there’s when POCs you Now, if tanks great patients Okay? POCs changed and tank, preferred you and at if restructure facing driving is a and is than at I a POCs around that’s they or in look that’s POCs for and any overriding there the that are mean, look has set nothing today. issue definitely that lot somebody flow using the less prefer what’s more factor

we those think long-term to very is So the us to – for solid. opportunity grow continue

enjoyed – wasn’t that position sales to in our mean, patients, we Now, years issues those the this face position we’re helping really this building access that if or we’re ourselves whether heavily happen. we we’ve the we’re access by they take think on access have market that patients, wouldn’t to And common a year have we lose market that we a provider we so great things put resource invested pleased that you I pretty have goals to in that last I accident. and over in guess we not. ago, XX but and and side. to direct-to-consumer let’s We with developed model working when that the like capacity. partners,

think pay I off to year us. investments for we continue that year. this the should last continue So, to It made growth drive should high

As market, away reimbursement comments, kind different channel a is from every customers continue farther different we’re will our in aside then set different Nevertheless, there. It’s and with that USA. to it’s growing it’s the Europe direct-to-consumer the BXB and reimbursement. of in animal Alis her fastest we be expect said from

on prefer compared patients little a really do guidance we’re here, more growth term, be it about there. we saw tanks conservative in POCs what they that a our excited So change. will like the just in But Europe, to XXXX, doesn’t continue we long to

a not So spot area as have preferred patients, are continue think good to user, a end the we by forget, because we’re most the well. only we again, I the we working have don’t preferred but POCs, product in to – that’s in in grow, product also the

Robbie Marcus

Thanks there. a lot, leave. leave That’s a it was That I’ll for great me. it answer. I’ll guys.

Operator

go next with The JP Piper Please is from Jaffray. McKim question ahead.

JP McKim

a I but view, kind of Thanks so taking worth because on these going investments from look so for been today, you the the ask aren’t we at then this investments. just question. down, metrics you’ve better got and your Scott, our internal at. say heavy look of they’ve that wanted to second quarter maybe, investment, Hi. question margins and we is

way for of off paying could us and a are kind that investments there up us? maybe provide lead hiring to frame on reps that is indicators more So, that these spending you’re can you you advertising

Scott Wilkinson

Ali chime and has that, POCs. and a start the is opportunity in. should issue lot around I’ll But it is something her I’ll patients I tanks here, carrying said I than to remember, let there say, more Yes. earlier, if add, underlying dragging

you and retail penetration, on Now, we doesn’t Medicare the to where that penetration or look of doubled penetration XX% the that data, the XX%, and been now more back that to measure still as the spend, is recent side. side comes fair full out we’ve much we a candid market. and significant at of the to capture have, pretty even you from the in quite it’s a POC access most now if points to ways go if say say XXXX we the the data even but basis that it, due conservative patients the data still XX%, that, retail and is modest pretty more amount And issues added to

we’re some sales were on go think, in titrate that’s less very years on the looking higher some said investments actually long-term made XXXX we better our we going even you certainly that growth our than we pretty going and rate. net looking we’ll we you’re and would hold for long I didn’t investment loss, accelerated in could make a a feel make focus the but versus absolutely growth mean income or at in than have at the trade-off XXXX, be on if we We a a the and we were comfortable even line. to the be higher to rates, we capacity, investing And if would satisfied at right significantly previous We decisions conscious our the we that and past plan into to look that’s and we absolutely right, So, ourselves. on little long-term, bottom base. to

us as company, and position. right quarter-to-quarter, strategic put do on to an long-term keep a to you’ve obviously manage a moves while in got public the we winning the So, emphasis

Ali Bauerlein

Yes, rate our to and consciously and that, and to add XX% as say, that from an we in proud went Scott would just accelerate mean we make growth XXXX, I I on effort in we that grew to it XXXX, revenue result, XXXX of said, did XX.X%. grew are

growth costs revenue about basis that our So, a acceleration substantial us of operating XX rate and margin. points in

are while, was it So we previous investment. showing we leverage saw less that think worthwhile a do that that did, than we in periods,

as the increased there, also looking the was the we had of look is look XXXX. those are scale there much to we efficient specific sources did didn’t and key XXXX obviously, need. business back see you as to at have that hoped half effective really we we there, and our when at than as so as at as to learnings that for some area up efficiencies year speed media quarters, we’re we reps as a there in there we sources the getting first quickly there focused improve making this the spend, fully leverage were Now and more the inefficiencies, sure some overall advertising in of in lead we And half now, that and results were on

to guidance to plan part of XXXX. we obviously, as don’t QX on margin had repeat So that versus headwinds in in results team, a certainly focused operating and are that that some we management and certainly we, is XXXX a improve our a focus, is

JP McKim

very helpful. Okay. That’s

on couple And ones here is, from more a then comment me can investors confidence you is HME do you large quickly and just to just GX of or from they’re give another compared GX, buying do that that? this the if you can competitor? Just purchases just COGS how pausing not GX

Ali Bauerlein

Yes, sure.

one. first the So, I’ll take

Historically, does take all design haven’t side, reduction to put GX of reduce as that lead and counts, the been able be official time. COGS new over lower GX versus products anything efficiencies, COGS out COGS able to in higher we’ve or to part the the lower we related an On cost to volume, we GX. launched have or the

for plan GX occur the manufacturing ramping our right to well. be would out gate, and GX always you’re through expect you’re would that we that with up the as the There’s So of as some that the working inefficiencies processes well. as

So, obviously, haven’t at cost exact the we haven’t improve the to quantified do impact we and launched but the the volume, expect profile for time, product at scale, GX market. help we be and yet to to margins lower a over us

doing and manufacturing that pretty be would kind initial until that we build of So, we’re in plan. cautious through

Scott Wilkinson

you me Yes. large that part second talked patterns customer who the the they’re And buying on and from. about buying take let on

not they very ordering still orders down. slowed from us they so see we have and they’ve significantly, they were ceased going While do that to advised certainly slow from them,

that surprise, was communicated to So, wasn’t that a once huge us.

they’ll do guys remember to even out to whether it’s and medium we of some like even tri-source have larger mitigate just with the you Now, generally of nationals that most larger players, that the risk, our there, suppliers. dual or

preference out that price. ahead to in So best the somebody from – any value, development do remain continue Well, we always buying that that’s them give we like preference with to so they patient that invest most just units a why drive stay our when important so But the we preferred there kind were is the product, competition, to we that be great That’s and product. product to great do. have the that at preferred else? customer size, people continue supplier they of probably, reasonable of way improve it’s they

JP McKim

you so much. it. Got Thank

Operator

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

Margaret Kaczor

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

for me, growth off dynamics, addressed just market front on but up you the market question. to the So four-part on warning first follow end, commentary a wanted guys so it’s I’m

two, you field? customer are this the kind What year, market private Part So, address third investments then more provide? within examples A, and/or you’re and easier making? you to how how of kind dynamics different you’re your label HME what what on guys partner either and is prior saying, difficult guess B can year monitoring targeting part in any efforts you is the penetration? of part year going is, throughout And the can are strategically this it I is you the relative out from putting

Scott Wilkinson

Yes.

your take I’ll Scott. one, for So that question. it’s Margaret, Thanks

the As that rate, far unfortunately, and is Medicare still else that’s data. there data as we’ve penetration the seen best is data available cleaner nothing that

a So that get once we that’s our index year.

channel indicators rate part as our our all leading on close advertising watch we what’s on. metrics DXC of of going Now, other as and

lives, if but if grow a some buying You certainly, customer, we sell our we’ve we or you buying look they at down if issue back. so you you out everybody And any always a customer customer even do lost that are customers never not, find out at mean, I what at a growing you want we’ve them reason out that an or to to with find somebody’s patterns you from to, to that growing customer? having to certainly the mean, service POCs it’s they’re is understand you’ve they not have have are and have times, why occasionally get it. market customers, given in address want lost you to so why, go find got look year-over-year, for market, the and monitor, I in did you directly and to lose what a

HME is team what that’s direct So our doing.

been as conservative pretty modest small far and and a making that’s investments as Now, we’ve pretty team there.

call in of do. job. has super partnership field we with investment there our private than and this great And strategy can they’ve we’ve label been partner, go-to-market out HMEs think got reps that done our they’ve got we direct-to-consumer on primary Our more a

we’ve that vehicle to price. drive a is need for a offer do you What handed You of help? that more off that What of kind make we’ve support look to them. sure are So been to they like? to them and have pricing able to competitive

market. them put of in any price a themselves they position, can and You money the they make out where can’t

going we’ve So from understand what’s on that that’s on. pulse they direct where that sure our kind got making have the of the that and the of the we’ve efforts support got our to us finger players go market the is support

the finding it So conversion. far, said, in with all necessary growth. we’re market are I and numbers very of to outside the we our for see positive of pleased a that metrics Like large down the customer slow albeit

Margaret Kaczor

two, at is provider, domestic calculating it if BXB larger I’m to I sales growth better excluding this it or part And look of the you C is worse? guess Okay. years just year And XX%? then that or in then that as one question this years was future prior into it correctly, was, relative almost the

Scott Wilkinson

Yes.

Ali Bauerlein

take last just the I’ll Correct. that first. part of

just BXB growth XX% you if four prior yes, for approximately the domestic at rate So quarters, for periods. was it look those was the the prior

Scott Wilkinson

normalcy, as catch the with the I slowed it’ll in until is BXB – up there least of they’ve half Yes, it we until I comp mean, creates Margaret, it’ll, year tougher in a to a down. at said, the return first channel,

that. recognize we So

last versus As this the year. is far part year as of challenges more question your other

brisk they I business that hanging can home put When your some ambulatory that think there’s delivery of have provider been a see be fast care down remote really see always some for lot But out, with results that see that shoot delivery. associated those and of POCs couple – convert some years, path start to go for more realize a to last out will that they’ve to challenge of without of eventually, or really some sorting are them as people fruit there are you put They significant that costs the your any benefit, they into actually are this of on have can get as that some got inherent there. they’ve through patients don’t every task out and they a to at cost a reducing some a challenges as infrastructure over low and either got tough provider. some rate them you infrastructure to can fairly highly you down more buying tanks you patients POCs the higher benefit pick. hunker on forever,

patients But on more one that side a we’re got certainly gets it makes yet. halfway think bit I your back the once you a through, literally kind of side not you get easier. it’s that past point, said I than get the easier, and up in little once on tanks are the you’ve the once you climate bit Now, on of POC hill that of as the point, little think get hill I’ve a halfway past, it past

Ali Bauerlein

the that that we in said range some initially for and Yes. our just be that patterns this volatility guidance in business-to-business national XXXX When growth we $XXX associated we of expected know $XXX we which November, that, large the guidance already feel in to a the guidance for on confident with in very provider, at just solid domestically add tough and had comps did QX million XXXX. place when already still to from year put why this we to million. out seen and with were XXXX, we to us put is for in buying QX going we

their guidance will significant we and starts there has and stops, be domestically when businesses into this factored is BXB lumpiness was that time. are we control So, industry guidance. and why And and that’s know to challenges in all at how in this and internationally of conservative develops that that over we we aren’t both look because convert

sales force So into channel investment that why in into our that’s XXXX. expect that was to in we be guidance and made force, fastest direct-to-consumer obviously, XXXX going factored we’ve a sales significant and growing our

Margaret Kaczor

you, Thank guys. Great.

Operator

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

Danielle Antalffy

Hey, good afternoon, the guys. Thanks so question. much taking for

Just Scott. one commentary, question on the market

what now the is therapy update total guys an oxygen way specifically patients, you have any still million – grow the X is therapy the number at you’re single-digits; you you than have data? I market POC I X.X given past number data is more should the Do So, low of TAM? to that think think more accurate million you think way I oxygen guys in are new seeing recent on looking the said faster the that. on based mean,

Scott Wilkinson

patients. Yes, a it’s to X no good million change X.X there Danielle, estimate of our million TAM and to is question,

XX of we’ve acknowledgment same X.X always we’ve it’s we few will it’s X.X a ways, in we probably change not estimate, to tougher of very million, at an than sources. that XXX,XXX, or it’s million within that I the looked different keep we it’s no said But feel emphasize the said So, haven’t million landed yes, used it’s area. not that an the a now data X it anything, million, I that kind movement be it is, estimate, good to that. because key about to estimate think

Danielle Antalffy

Yes.

provider how start a Okay. That’s care purchasing that or you could trying if sorry then customer one to, home this you purchaser? expect Just we not Is recently. if actually in follow-up this something this this again but potentially And perfect. that’s you a where is Thank see care – question on for is on that. that that you touch so get back the a expect back? to and much to time, if I lost? with home some customer And are saw they’re purchasing missed this provider off this customer earlier, this during come today sense you

Scott Wilkinson

Yes, it’s good a question.

Danielle Antalffy

have how And that? much you that can behind

Scott Wilkinson

they’re try what again, – going think I and plan and about much business or do individually. else’s to talk somebody Yes. to possible I not as as

that used order and to get again they I’m through put it ago, when they it say if I care the this. have that let we things go in that POCs position So, don’t know from me provider not for, they years I happy it can XX can’t back. channel that’s things sort think, market want they Inogen, or to would in I up, pick come like tackle. patients some have get access to customer provider, it the it other that out they’ll ourselves when get that to they a back can have got that to home through remember blocked pace some They’ve like so through we’re big and providers so to where the be.

we want predict have to don’t I so don’t clarity just on. can’t just that prediction we a So, make when,

Danielle Antalffy

Yes.

Ali Bauerlein

reduced compared that Yes. run rate. buying quantities is And in customer reiterate, but just still prior to to the

Danielle Antalffy

Thank much, guys. you Okay. it. got so

Operator

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

Mike Matson

questions. taking Thanks Hi. for my

some numbers, market the saying. to I other I heard that with you’re wanted Danielle the the what – but just know gave Just you of in commentary one kind you change repeated start I of made. think

do about And you market years I So why the correctly? I it kind of a you’re it’s the years? hear seven years of five talk inside timeframe like now fully about. used penetrated that XX guess being now think versus Did you to sounds five-year talking to that

Scott Wilkinson

been it’s already a conversion. a and we Mike. XX to said been years We’ve of mean to years I years seven question, but seven couple for we Yes, process of we’ve that we’re saying, XX years, saying in years, we’ve also – realize good

kind realize So So pushing we said of if seven out, to years that’s than more that years, that why years. we’re we now right? to just five say we continue XX

So say – don’t I could have. Could I’ll it’s I could. don’t still of it it’s it estimate, could challenges – going it overnight, we’re think longer. Yes, Could it longer? take it again, take go to an people happen faster? seeing take some the that Yes,

why we control so own access our so that’s it’s market that of again, us ourselves, have we the important to more have destiny. For that

Ali Bauerlein

opportunity time. it the would for five a of take Right. that longer longer much does from say, XX period now, years And be does that than remember, mean it retail years, cash, would if stronger take the

would market obviously, well acceleration above to for be XXXX be accelerates, as to versus whatever as expectations. and happened guidance our the BXB to So opportunity we us able capture see that still period an that in share continue BXB then sales

Mike Matson

of with quarterly comps then in you give don’t first against to Okay. XXXX, just And some That’s the I coming I’m understand thanks. half. tough up the regard helpful, really first but half guidance,

expect kind I’d guidance growth you’ve where give the for things first imagine know slower the qualitative was XXXX, us to of second be to – in I around than So, be to second growing like you’d but? is in half, you’re of you there any do are haven’t to you in going consensus half quarters where range, but first exactly, street the calculated and that comfortable is, with modeling guided revenue I the

Ali Bauerlein

Yes.

comment And know. we make particularly in guidance, don’t the did as QX and QX for the question. for give thanks around tough reason. But the we So quarterly comps a you

that So, half the go back but we to good will BXB they the perspective. the BXB solid than of the and challenging taken but a a about channel that national some maintaining domestic from the those quarters, growth full rates the that yes, be doesn’t level account do in the channel comp provider think it were do QX already rate previously, year buying of cadence in more volatility growth first QX feel QX be we year, QX within into assuming the that in for will and large domestic still challenging

Mike Matson

products was, And I or you’ve you’re it’s thanks. rolled Inogen at I uptake Connect? last can the that about adoption, how guess the That’s comment sort now, finally, rolling then just out or the Inogen is just of I second kind that of on you much newest selling all quarter of be Capital. mean, and Capital. but Okay, know guess you then I point on talked out of indicated would Inogen on

that So, have of maybe with kind Thanks. you things stand seen? reception where and what

Scott Wilkinson

we We patient Capital and I’ll tracker On launched, fourth map, Yes. seen It’s can in you product up. sold devices look actually turn ton at a question we’ve that hook even that the we as Ali. late – we’ve patients one in Connect, to of we USA. really all though only the I’ll Inogen of of geo over the take can because on quarter, the kind Inogen the exciting, – said channel

other up things, interest. been for where the connection rate a a No, people hook the There’s seniors we to connect on trips product tend side, taken up, shows We’ve that with see the people that’s gate bit Europe people easier and struggle it’s realized pretty no heavier little Bluetooth well. not it’s beefed bit little going for we little some the a in support on everybody. to and have can expected places and You out are than probably got of globe. up this

really later, – see it that in say, it it’s exciting patients around. to maybe those engineers excites retail value that moving people see and really can Some moving our those It the are channel. say I’ll team and they the that that pretty excites but about

the this side, we BXB launched On just month.

portals they a their pretty couple that data their customers Most monitor can portals. through weeks in, of so setup, we’re getting of the So, just provider early. BXB are the

we’re to commentary more can comment, next So, in, because like it’s I Capital? some a early little said, call. the but we weeks have only two on

Ali Bauerlein

Yes.

that on small customers use we’re Capital, out excited Remember, quarter, had providers. obviously, really HME have the roll in to Inogen this fourth So is that. targeting we the

So, really meant this as to a regional players be source large relationship. for banking their own is access financing financing not most through the to or have

So, to those it’s product to providers and small that really we more with meant continue grow offering. comfortable to help get providers HME the in XXXX as expect

Mike Matson

Thank you. Great.

Operator

Matthew Blackman Your Stifel. next with Please question ahead. comes from go

Matthew Blackman

If everyone. activity. I on Good provider decreased questions the couple with more that start afternoon, a ordering could

back domestic percent share to guidance ordering want be you provider to in you that’s the just then expect And BXB, purely in comp the willing contemplate would half second of business your second, First, accelerates customer acceleration clear, driven what that half. that right, doesn’t your be represents?

Ali Bauerlein

yes. Correct,

take me the let first so – question. So

was customer, private-label actually that customer is material material customer partner not our that customer. So who a the purchasing through

that guidance customer make to back clear. the half, to assume contributing that, in the number. our just overall and guidance does that that’s that accelerates growth So But not

Matthew Blackman

Ali more business other on work? still if any actively the balance just I’m considering in to sheet priority I stock, and of then could M&A if is development and the I But this shift also, activities highest now updates given helpful. And the for ways curious be is to volatility cash the would or Scott, Okay. assume putting you’re deployment

Scott Wilkinson

add. it. Yes. a But to to we’re the add something product M&A first, at certainly let me not for talk piece just to where we right the continue to add about we look point, want

disruptive. that asset don’t we just We fantastic our high. in product obviously waste want be sales to We’d direct-to-consumer add price, something continues force a we really bar on have like marketing me-too this that sell to that’s that and of So a that’s our team.

look, obviously, we yet. haven’t to found So, continue anything

we found of to question? our of market, anything Margaret, haven’t looking our haven’t expertise anything. but we we mountain now, we’re probably that it described closed leverage We the be second right for criteria, would get then and big with of found the that disruptive, where really all relax yet. part something And yet, and point we’re to If a that back side a feel were like we over I haven’t

Ali Bauerlein

that. Yes. I’ll take

options we Nothing at future. So, in have been all on other given time use allocation certainly a appropriate some are opportunity that in that. point on for currently to we items could would decided at And capital expect acquisition still the be that front. point we pursue strategies, that has cash the this large

strategy in point. this no So at change capital allocation

Matthew Blackman

sneak I one you, if could last in And Ali. one for Okay.

helpful. there anything is way given XXXX, large would the or XXXX increase Just give productivity in sales maybe compared us rep even precise you be a the rate can and a force directional denominator, in tenured how to that

Ali Bauerlein

now our keep space, in that direct-to-consumer into tightly for of organization. purposes, the manufacturing particularly to competitive disclose jumped that Yes. very We the held like more as have competitors really don’t we’d information

Matthew Blackman

think on that’s wondering just a low if But accurate. the sort of sort still it’s that of basis, you in increase. a I past, year-to-year single-digit said I’m

Ali Bauerlein

that is Yes. still accurate.

So, expect to each we do to continue year. improve productivity

that. initiatives points. improve year, that’s each have So on of productivity usually And couple we to the side a percentage

nothing type assumed the product is are guidance. like things launches, that of that like in jump things thing, but new Sometimes, productivity that

Matthew Blackman

very Thanks Okay. much.

Operator

question Please through from comes The KeyBanc. Mishan ahead. – with Matthew next go

Matthew Mishan

really to of And Are you Inogen guys follow-up of the right what for you or And just channel that product be the could direct-to-consumer think right good sales just curious, the products it. a taking not leverage you your force? M&A think in criteria but at of do kind of pipeline – for necessarily piece now? the the type seeing you fit would that thank a that be that DXC Great. would a questions. price the leverage on

Scott Wilkinson

Yes.

have but not product, the keep you a years right future. you many is and going if is if that course, that it’s I there we important think that’s right the think path believe fair disruptive, have right you because found the is haven’t one price product, you high to a limit, on say the product, of for truly you reasonable growth really to in

to we compelling to might have if that So, say thing think we I right a something from want, jump. checks maybe that of haven’t I disruptive, the is suppose, we didn’t our take want We’ve somebody years now. picky is of standpoint. years. things we six could find that price really been caught found said we that will in market compelling things I couple were that say some themselves eye don’t a five now, we it’s But haven’t they out – of next that boxes enough say, fits right the if market. It’s be on, got fair we’ve we’ve But willing eye. that seen right of few we that some main we’re the us the things don’t very our future, we the out do what for have we It’s they we some that thing to to – I’ll that think anything that but these not our in

Matthew Mishan

Okay.

Ali Bauerlein

needs. that something is it to it’s there difference also patients will efficacy that sure their we’re and treat that for making make say the watching, really And that clinical Yes. and – a important of would I ideas

forefront. ideas, the we’re taking So in that’s – something all evaluating really at

Scott Wilkinson

We – I’ll were have pretty cool they say didn’t though, didn’t they great Matt, our things leverage some seen products, direct-to-consumer but that approach.

So that’s where good it wasn’t match. a

Matthew Mishan

trying of should about question, could growth is year Okay. underlying phasing And sales then for sales marketing what XXXX? of how I’m in the you leverage the that’s next the your give the think to understand the and growth the to implied and a guidance? we just sense for and direct-to-consumer of by last XXXX us marketing

Ali Bauerlein

Yes.

guidance and see on obviously, don’t in in sales do we when we given leverage just basis, sales the line QX. we happen normal just QX, should then at leverage, best QX to the expect and So give QX lower so specific seasonality and qualitative some a marketing and see our

else XXXX trend years, in that it equal. most expect would in I has to repeat all being So, as

but couple think remember, where see important were that’s to efficiency to, we note, I do in So, expect that expansion should XXXX than the because rate force sales we in lower last compared that do of XXXX, be years. rate to of some for the

Matthew Mishan

All right. Bye. Scott, Ali. Thanks,

Scott Wilkinson

Thank you.

Operator

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

Scott Wilkinson

to Thanks. of in our by a direct-to-consumer revenue I infrastructure investment we growth strategy. investments what as to XXXX our strong deliver for continued results be believe for us year These revenue will associated of position record line was close Inogen, Inogen scale and another saying we wanted and with year in XXXX helped sales commercial bottom helped XXXX.

on initiatives portable oxygen on of you focused executing likely strategic for another best-in-class our our and concentrators. Thank year. to are adoption last evening. We our good remain I employees and increasing fantastic would thank

Operator

The today’s presentation. attending conference now concluded. you for Thank is

You now may disconnect.

Inogen (INGN) 26 Feb 192018 Q4 Earnings call transcript