INGN - Earnings call transcript Q2 2019

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Operator

Good morning, everyone, and welcome to the Inogen, 2019 Second Quarter Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please also note, today’s event is being recorded.

And at this time, I would like to turn the conference call over to Mr. Manager. Relations Investor Bacso, Matt Please go ahead.

Matt Bacso

participating Thank call. today’s you for in

Wilkinson; is and Joining Inogen Scott and me from CEO, CFO Bauerlein. Co-Founder, Ali

Earlier in the for results Relations section This Inogen’s released company’s quarter Investor presentation Inogen website. the corporate available XXXX. and earnings the currently are of of release today second financial

our expectations and changes for growth strategy impact revenue expectations information rollout related strategy of expectations, for strategy such channels, market, XXXX and our beyond, to expectations on COPD to the of and presented One forward-looking to TAV the the the competitive of benefits XXXX. the or market reminder, our and impact in Inogen TAV will a include expectation for HME patients, including potential new prospects Assist® of statements, sales the financial and and expectation including regarding ventilator integrate expand the headcount, hiring Tidal our rental Chinese timing for non-invasive on opportunities Ventilator the TAV, and tariffs, expectations, to acquisition treat technology changes, Aera oxygen GX, impact the expected As today XXXX, expectations of all expectations the statements strategy, of disrupt guidance bidding, about concentrators, expectations expectations regarding sales, TVA our into and marketing

and are information in predictions with available our currently forth Exchange Securities call on recent in to forward-looking based are this risks involve reports and only most in and statements detail Commission. filed These statements are forward-looking uncertainties the The more periodic set us. that

may required forward-looking disclaim any by statements, and law. vary except to obligation may we update results these be as Actual

section investor a more in files the information. the historical of for these our presentation We Relations a company’s in acquisition second statements on have the Please website. to presentation Investor financial refer and quarter new Aera detailed separate posted

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

U.S. between tables are non-GAAP GAAP our release. and Reconciliations results within presented earnings in

as a For guidance our provide in to release. we GAAP unable most more earnings detail comparable to reconciliation directly effort future non-GAAP periods discussed are our the measures without of in unreasonable

and turn CEO, I’ll that, With the Scott over Inogen’s President Wilkinson. to Scott. call

Scott Wilkinson

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

Looking at we the the the quarter second have time XXXX. of second XXXX, which we the and is of revenue generated quarter $XXX.X million, X.X% $X million total threshold the first quarter growth of surpassed over for reflects record of

second in period Direct approximate comparative headcount XXXX, due increased sales to sales the an XXXX of reduction representative to by prior consumer over quarter of million in year. XX% quarter the of representative primarily $XX.X partially the of sales the offset productivity, in XX% increased second

we than loss reps did representative sales Furthermore it XXXX higher quarter, improvements the was in expected the of not as than productivity attrition level The in expectations. offset more many targets. quarter, sales while meet hired to representative unable of that sales our sales the the headcount second meet were in in our

performing larger scaled the a benefit trials leads to top across group where not when allocated early representatives, this we generate initiative did successful we anticipated. Despite more

fourth than improvements, sales less sales reduced to XXXX. quarter the the headwinds growth representative productivity expected we and to realize in expect consumer and and direct headcount Given to third of

capacity the all three XXXX. across expansion restarted August facilities we productivity, new sales have our improved in hired realized sales representatives with efforts With

in did a and onboarding. at hire what training infrastructure necessary we believe we sales and changes support XXXX, to Going to forward, management our making we to improve plan controlled sales we more the are than pace

made personnel predictability. better management sales also changes and We have to key to drive productivity, attrition lower improved

be to largest significantly driver year headcount year-end down end at is However, reduced expectations. XXXX the compared which we expect XXXX, of revenue representative XXXX sales to our

Given the we’re expansion sales to number monthly a to to leads the growth. believe consistently generate drive of productivity on need penetrated, revenue execute market but plans direct-to-consumer our basis, remains under future able capacity we we and

second primarily of of of patient’s the revenue to XXXX patients of approximately of on a as had second quarter due compared X.X% rental service, quarter XXXX. X% revenue rental the million per on partially of XXXX, Second $X.X quarter We decreased patient. by XX,XXX service higher to decrease of end offset the

change In XXXX, team until plans early to modest initiated not meaningful separate rental we our rental our a but of we this quarter and contribution criteria the fill did a to team, made from expect a intake second XXXX.

modestly Due reduction of in XXXX, separate rental as revenue to inspite to changes down a sales rental expect increase to changes criteria we the to the the revenue team. in rental intended intake be such establishing rental headcount, and now

service of expecting in on patients service both back-half and the of and rental XXXX on the in from to to we’re patients expect We XXXX. revenue XXXX increase second increase quarter

a of our second we earnings the in second in call provider that sales in XXXX, revenue XX% The through to second who down primarily large a Second XXXX, XXXX. from have in of XXXX partner in $XXX,XXX domestic sales of due quarter due purchased a $X.X and to national $XX.X our quarter internet label quarter business-to-business the to private of decline large last decline sales from secondarily, partners. discussed provider for the accounted to quarter reseller decreased our national million of million

orders second spring internet of XXXX down XXXX not partners second Sales our in partners seen the to increase seasonal the months. as quarter in quarter did summer versus our of reseller previous in and were as typical reseller see

and continue Excluding customers. demand this internet HME provider strong we to traditional sales one national see partners, our reseller to from

due efforts, lack purchase oxygen and to available that will access capital portable convert and credit concentrators, constraints. expenditure to we to be restructuring expect to continue providers HME provider of ongoing continue of While challenged growth

that to and that continue limit certain or reduce us intend have providers we in subject the As they to indicated constraints, be communicated they the in discussed have providers purchases capital future. have to HME to past,

Additionally, investments year with and in more the we conservative competitive contracts believe providers rates. to capital lack around to visibility next will reimbursement the of pending due will be and win bidding changes in XXXX who

we market market under still we patient a demand strong have though product the is offering. leading and Even is believe penetrated,

providers and remainder we are our internet resellers customers, lowering for growth Given for of the these challenges expectations uncertainties HME and for business-to-business our XXXX.

POC’s of $XX.X key constant a reported European preferred as sales XX.X% growth remain were basis, on European million, for strong representing we X.X% at and Second quarter XXXX provider business-to-business international currency underlying account. the trends solid remain of demand

this Transitioning technology have launched in with Inogen leadership GX, position to strengthened the and One the consumer believe direct we April our to channel we in we product. XXXX,

a lightest than As the oxygen. milliliters is reminder, market product of and this that oxygen produces portable quietest greater smallest, the concentrator XXXX today on

in on international we and domestic communicated by each rollout the of expect our XXXX, regulatory pending clearances call, the XXXX first quarter standard to Inogen then to As to quarter business-to-business market. the channel third of the in end business-to-business One channel GX

plan opened publicly. XX, the On but bidding XXX the to strategy Bids September in we bidding betting as window cannot are competitive regions, XXXX. of XXXX, expected topic bid July of We our discuss by XX, due around XXX still XXXX.

We of of be expect contract announced announced X, and into pricing XXXX, winners in in fall be contracts before to XXXX. the go summer the to January XXXX effect

area provided higher tools, bidding the accounts can data, XXXX of competitive versus CMS penetration CBA each preparation by In part around we XXXX are competitive code. bid that non fee-for-service CBAs bidding evaluating areas. beneficiary now Medicare each see in POCs HCPCS for As XXXX traditional and rates this for

Medicare XXXX for total traditional while and U.S. XX.X%, in oxygen CBAs. POC’s was penetration was In the the total it XX% market rate

progress, XX%. the XXXX. for total are know in penetration is we rate is the total penetration market XX.X% in to XXXX but still can estimated term in long POCs the traditional in service XXXX, While full of U.S. we our believe for data October we a Medicare published way oxygen rate beneficiary that the was therapy until penetration see we fee XX% adoption continuing CBA’s from POC won’t to market compared long

to discussing a to Now and of from manufacturer portable of announcement ventilators the Agreement signing suffering New diseases. various significant some like Definitive of today the non-invasive innovative people developer I’d for spend an time Acquire lung chronic Aera,

excited payment of regulatory $XX.X to announce for assets at million plan very and closing, million are of earn-out and performance sales with $XX.X We based to payments from cash Aera clearances. potential on acquire related New future certain a certain up a our entity, to

and position increase natural a and to current oxygen We strengthens believe our products services. independence aligns freedom Ventilator our innovative New it for and market, and our core is nasal with Aera which business innovator and an through with option therapy as fit interface our therapy patients, mission

We preference Tidal technology make technology plan maintain Inogen One oxygen product Stationary Concentrator At-Home therapy to into Concentrators Assist® SideKick incorporate Ventilator or continue with and and long to advance the our the compatible directly leadership term our market. Oxygen Portable Inogen the TAV to TAV patient position our in

use with a to completed small with alone severe lung of COPD TAV or oxygen, oxygen peer-reviewed very their just standard interstitial patients trial comparing clinical Aera moderate the SideKick New either for product disease.

our therapy and able markedly and to less showed trial oxygenation fatigue with leg TAV therapy that The these oxygen a additional XXX% than responded on were opportunity. of patients this oxygen patients will XX% retail strengthen trial to exercise increase. The alone. longer versus indicated oxygen allow We on dyspnea to product better allow and and an alone on XX% therapy us portfolio and positively believe showed endurance TAV mean sales

the growing plan million ventilation addressable fee-for-service as XXXX claims beneficiaries an estimated market. traditional high market U.S. We non-invasive to paid NIV for XXXX. to be and to in use based technology market on per opportunity at into platform $XXX has Medicare of over expand over estimate the our addition we year a since total addressable NIV growth XX% this or In

worldwide there believe a significant opportunity. untreated market We is

reimbursement around inclusion NIV of to XXXX could to undergo competitive similar NIV We nature and the immobile offerings. given pending this product legacy disruption market also of changes oxygen due bidding believe and category the the the

allow HCPCS rate at for $XXX that month. to a January The than of effective ventilator products billing includes has Medicare multi-function a Also new been a therapy, monthly Medicare oxygen ventilation for minimum XXXX X, reimbursement added oxygen. and significantly higher NIV code is

to a targeting are in XXXX. product launch purpose for this We

pocket that the an be expertise. consumer not over patients to represents particularly an XXX COPD help of to Furthermore, breathlessness, to a that during and attractive used this of in currently reduce opportunity market oxygen existing new willing are million therapy to worldwide out who we This are portion can adjacent direct believe technology for our would pay exercise. us technology leverage on

product TAV inside direct-to-consumer force position SideKick consumers and existing We sales plan customers the to to to and through our sell also sales business-to-business force our worldwide.

X SideKick oxygen, SideKick is chronic higher ventilator prescription various can diseases. oxygen patients per design non-invasive approximately to is and oxygen concentrators, flow wall for a of TAVs one gas, minute compatible and liters pressure unique certain required designed with therapy. and providing cylinders is The ounces versus oxygen TAV select five deliver with lung and traditional

believe TAV We the gross SideKick to in we therapy versus be it will accretive expect margin of begin product existing oxygen business. sales XXXX our and

sales growth from associated Looking direct results, to revenue guidance million, XXXX expectations in million, versus year X.X% primarily million consumer we representing $XXX down our X.X% total million with year of reducing to to to reduced $XXX are to XXXX full XXXX, full channel. $XXX $XXX of

expect quarter domestic revenue of the the of compared be XXXX in in year. negatively third to expected to our a We XXXX both channels. productivity the compared to the down increase sales third domestic reduction and period headwinds due headcount impacted direct-to-consumer In the of be to in will sales the representatives, prior of business-to-business same in spite by in quarter sales direct-to-consumer

in Given in XXXX channel, the of domestic domestic challenges face the third and to of sales the the reseller XXXX. difficult expect quarter compared business-to-business declines purchases, the we restructuring providers growth of business-to-business third channel comparisons in some internet the decrease quarter we the in

seen a have headwinds, currency easier of fourth remainder modest in compared quarter in expect of XXXX the rate spite of for lower to international the to of due XXXX We quarter in the growth XXXX. to sales rate business-to-business XXXX growth fourth comparables with

service sales slight of to We we intake now number the XXXX. the change of in revenue in XXXX on to expect second the modestly down in to in reductions do to due the XXXX rental spite of but expect increasing criteria from back-half headcount, be quarter of begin patients

expect XXXX we Lastly, contributions in do the contribute is not to but XXXX. New Aera expected materially to transaction Inogen’s revenue,

we believe double today, XXXX. not growth XXXX can to While revenue providing we plan to execute we return are guidance in on our digit

to I our turn the now Bauerlein. Ali. over call CFO, Ali that, will With

Ali Bauerlein

morning good everyone. and Scott, Thanks,

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

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

total Turning the in quarter XX.X% quarter of gross gross compared second margin, margin of to was XXXX for the XXXX. the XX.X% second

increased XX.X% margin sales the of XXXX. Inogen margin in in domestic quarter by gross and per primarily versus of tariffs. cost lower was second XXXX in gross launch increased sales Our lower of was The sales and mix sales second XX.X% direct-to-consumer margin partially quarter selling spite prices, average the towards higher One offset the due to decrease unit GX

second the margin expense, rental primarily The was gross quarter revenue per XXXX higher by second offset XX.X% partially on increase increased service to of XXXX. and gross rental lower patient costs. of in XX.X% margin due in depreciation service the was Rental in quarter versus

increased second in expense, operating $XX.X the or $XX.X total for As XX.X% revenue of operating or in of quarter second quarter to revenue million XXXX. XXXX of XX.X% expense of million the versus

$X.X the quarter expenses. second quarter million to in compared of XXXX, second primarily in million of development to due expense decreased the and personnel-related $X.X Research XXXX, decreased reported to

$X.X $XX.X as Sales we period $XX.X personnel-related to second advertising QX, of second in and in million marketing to XXXX comparative versus in compared in expense partially decreased the XXXX due increased In offset of million $XX XXXX. million primarily expenditures, by increased advertising expenses. in XXXX, the the quarter spent to million quarter

General of $X.X costs to million with by second versus associated in $X.X of quarter and New million to quarter the XXXX in million due expense administrative $X.X second personnel-related decreased primarily decreased the in Aera partially the XXXX, offset transaction. expenses,

or on XXXX operating million return reduction second return in quarter on for operating was income XX% due XX.X% revenue, expense. in which XXXX income quarter $XX.X second to XXXX. increased Operating The million compared to the second compared margin of second to was represented the of revenue XXXX of of $XX.X quarter marketing quarter primarily

In the $XX.X income the common to net XXXX. Earnings in diluted $XX.X was net quarter versus million $X.XX reported in XXXX the second second million of quarter quarter of second we of of second in income the quarter XXXX. per compared XXXX share of $X.XX of

growth sales. XXXX $XXX Scott results, $XXX as mentioned reduction reducing $XXX turning $XXX we expected year million, representing versus to to XXXX year revenue with of to Now guidance X.X% are to from guidance, million X.X% full total direct-to-consumer million the full to down million, primarily associated in

associated quarter acquisition million, the We in amortization expect second million including $X.X in intangible of $X.X in costs in $X.X in $X.X million of other million expense, incremental expenses incurred million New transaction the approximately approximately with operating and expense of expense, XXXX. Aera $X.X with XXXX,

primarily This to reducing million, to $XX to are guidance $XX of We net the expenses income year Aera other net estimated our but previous in partially an million. New the net with guidance of $XX full reduction reduction increased estimated million $XX in income decrease expenses. offset million income compared XXXX associated a to in guidance due revenue range range to operating by and transaction, is

GAAP expect XX% rate in effective We tax approximately a XXXX. of

XX% of guidance that stay for assumes president a Trump imported affected tariffs September materials and remainder goods to XXXX. announced XXX associated The imported additional new China X, up tariffs with XX% August at On in XXXX rate X, Chinese billion of XXXX. the from products on

the on We financial are our still these of evaluating impact results. tariffs

proposals monitor forward, risk. and reduce the interests our to any steps protect economic take and standard and continue new changes financial to material we Going costs our to policy tariff necessary plan

to from full and operating XXXX million, $XX New guidance New down of $XX year range inclusive are to also million adjusted costs, reducing the to $XX incremental million million. operating guidance $XX range income million million, to $XX our to we to to year of previous million $XX $XX compared are $XX reducing Aera also Aera costs, income non-amortization million EBITDA incremental We inclusive of full range XXXX the

I With that, questions. Scott can and your take

Operator

Instructions]. [Operator

Leerink. Please your today with Our Danielle first question. SVB ahead go from Antalffy comes question from

Danielle Antalffy

Thanks what the an to of was I it everyone. slowing morning a domestic good much Hey, with higher feels start question. Ali, and I gives like – you initially of sort for the BXB Scott wanted guess know side issue you just the taking question. level provider purchasing. so with this HME things in major

you what market Now it confidence bit I question and like guess gives little all is, deeper, the sides more what underlying you’re feels in getting ahead it’s a that not dynamics. something on the first

competitor increasing color but little do a us two can POC do thought, that about get I that and or we position, with is and another the what has out you extent is increasing, the dynamic, of penetration I premium you in growth sorry guys to pricing there, it that the confidence know underlying bit gives something do if winning give price there. that number a You you the have concentration number you Is there to still still is know competition. is at because a it that Inogen one, to

So here? just confidence on growth the a little underlying color behind your

Scott Wilkinson

take Danielle. one. I’ll Yeah, thanks Its Scott, that

a of of peel the So a areas couple let’s onion for second. different kind in back

you the and in are market market. we direct-to-consumer start sales know and where the I’ll First with

you that way tools that or So Medicare penetration if competitive provides, below know the the market full the the still all you tracking recent look use traditionally, at codes, through rates whether penetration the we is numbers the it’s bidding HCPCS point.

of leads real that that also know look POC. generate the we they’re thousands advertising that tens month, We we our can and at get number you that oxygen trying validate that leads a every to of of answer in when have confidence of we it’s patients

know that getting opportunity fully future. so indicate horse market but numbers again, the that’s assess, So still are on the the we I growth that into capacity you think we we the now, penetrated, our to and in expand when drive know those why not only or saturated we is back can you have future sales

or the issues peel worked some up hired of to a get you you that the curve where continued a the of talked struggle the if one onion them the out themselves and also that way we we point in with DXC to call the the Now XXXX, we quarter reps of so company. them last on know to work back know the or we’ve in in them second you with lot sales, about another

them because accord, of their didn’t Some they make at because own left the money their they successful, didn’t they quotas. didn’t, they weren’t hit they extracted

to we know trying and them couldn’t proactively so know with this You out. that them, after job some clear it they successfully, was just work you do transitioned

them. compare you and still productivity great results with our sale success, sales When reps that reps track and seasoned with you other we their and see

had you metrics issues, know other saturation market in seasoned those reps. know with if you’d of you So you the some see

process, changes implemented it’s boarding amount been two to great small also back where some while in put real going challenges processes that and you support are So follow of results intake seen we we put through with at the hiring what look know more reps did when to do we in we and we peel on we’ve execution those, that as infrastructure metrics a classes looking criteria, come have had and plans address have we small place better, hiring and can sure make up improving classes. and as better we’ve far curve, they as at the these consistently those those hiring we to our how we place with

classes, almost know historical you we having had smaller no are from So and those they beaten the success. productivity and curves attrition two folks classes have those have

long swallow, confidence you all but some when you and that up, to attrition as the our toll you kind growth. to a term you sales we a of to year, execute expand well think didn’t are to have of the you know So great have position but take again have is our obviously because know you that this grow we off we we know that begin ability for hiring historically in bite had as we we still on roll know to and going of capacity, rest

the we the leader, and We in launch. GX my the still are a patient know have bit still prepared preferred you talked about product best we remarks little market products

had product, better and You the even only best. we launched what’s an the but best know not traditionally have we product just

growth So you the on we know ability wagon. get digit feel about good future to very our back and that double

Now any we the and side that’s about described really that the on talk different here the past. than about you BXB, what challenges BXC in struggles talked that’s and aren’t we’ve if know we’ve the

swallow cash model have restructure make always providers they know programs flow, they’ve the challenged the been You capitalized, still developed help hurdle some innovative them, we’ve non-delivery financing with have always under work. been to to but really to

So we to that’s be continue challenge. going to a acknowledge

them of eyes the I it being smaller and on think and then challenge bit they has middle everyone; for chance competitive hitting more the you makes out window pessimistic the market. it’s bidding, a of know know a kind of little between very of in bidding get there’s real a the could psychological them the a right screened you a players because little effect

out, are always because said not preference well despite POCs conservative to on to a process forward are know standpoint, until are being and to with an you the that away. past, this it a know we’ve our we rates off and headwinds through dealt you in going they’ll these the or shakes they they little as is from as be that It’s So event patient be, and they what go of hurdles. are expect more just standpoint, going we’ve why compelling out are transition those cost going not service a

Ali Bauerlein

you areas. asked the different dramatically competition. market anything know really pricing and aren’t I also We those you in in know Daniele, seeing about

customers know pricing, price are sensitive. business-to-business well our always You

continuing to dynamics assumptions forward. dynamic and that not from seeing aren’t maintain impacting competitive believe position our those there any the changes and we our going leadership new front, We are a so are market we

Danielle Antalffy

XXXX I helpful, I return but guys. giving that’s digit growth And be you’re would double guess it, know guidance, these digit again. you quickly purchasing how issues for when headwinds mention it’s I you’re the start thought thank HME facing that to example know provider okay you they’ll will could and you like growth. lift, predict, can ask, hard in not then that double fees guys, Scott seem to you Got you doable major

And that looking guess give comment so you that the bit confidence? to having what you makes conversations provider Are guys. of think the Can little that large they’ll so XXXX? I color Thanks at are more you HME you gives there with there? the you start purchasing in again drivers much a

Scott Wilkinson

Yeah, or about be national that, plans would to do don’t our so you past, that they know them the in have up-side. talked large in if growth purchase, we were that the returning we’ve to

think term to We their longer their continue more restructuring that address to hurdles. are struggles

stop home one are other purchases, see you out those similar and decided given they there, care they down you is companies and The you They you to just another know quarter. any is up haven’t face hurdles. know up; know down some of

contract. trying We as trying that so and balance Nobody the that hurdles, to serve in they do have I’ll to you telling some their you we are don’t with expect are see the business, is they that POCs to they future, convey patient but say closer demand, but be convert that, they have contact people. they to know try pretty what with large national. don’t contact we close are us given happened in

to they’re extent help more unique dependent that our direct we again can, the while our drive but own You approach and are pretty them with them, extent think entire is little consumer portfolio, is what’s portion we’ll of sizeable and revenue to we I our on for I revenue they’re mean to that we destiny us our some not of what us so to can know a portfolio. important really

would we statement XXXX. So were growth next being we to growth projecting year, can double for feel the us that to to sales where and you digit we now headcount lap know when of confidence in model drive gives make be we down to return us that out kind and that a continue in capacity that that are

Ali Bauerlein

Yeah that look when our we just on that national account XX.X%. total up at basis, to we’re year-to-date expand Danielle, bit revenue on a excluding a

we really, in issue XXXX. are comp the that that a obviously we’re a with back-half into year going is of through this gets, that So dealing eases bit and headwind

So in XXXX the saw as be that and BXC help growth and side, lapping and that on comps itself should that large overall seeing should additional rate in of what tougher also we and those lapping the help should just we’re the XXXX with we there sales hiring well.

said, we rental as not as XXXX expect know to into also start We you to going revenue well. growth, a increasing headwind and being

Danielle Antalffy

Thank, you so much.

Operator

your from it Our William Blair. with Ma’am, Margaret next Hey question Please line ahead comes from go question. Kaczor is possible your is mute? one

Margaret Kaczor

me? can guys hear you Yeah,

Scott Wilkinson

Yeah.

Margaret Kaczor

Good taking questions. the that. for morning about thanks Sorry Perfect! and

drive second digit of bit Danielle for maybe to more question, had to which guys was little rate growth kind that double off, reference First talk at a I that XXXX. hoping you

and moving where XX%. the what this is So maybe with. you of right business you sales pieces productivity through attrition growing few continued I underlying know to back understand you relative reps, There’s end, with now the that kind still guys reference to obviously a finished returning XXXX between year

at So maybe as XXXX guys forward you products beyond. you can new you just talk and through beyond then geographies we move new the of and or cadence major drivers this into or looking year, that go as kind are of

Ali Bauerlein

sure. Yes,

growth into XXXX, aren’t any country. digit the looking double new So material assuming contribution from we this expected at of from side going

be we that isn’t really Europe the doesn’t look contemplated like include to opportunities plan the that any to So our will focus areas and do here in for outside still continue discussed we new in as of and U.S. their, in our Obviously primary contribution China. market. numbers but that

assuming New product portfolio, years, full we over excited that very R&D the products, relatively couple are technology use the that work our in are product Aera portfolio new XXXX. contribute but of the a with contribution From is to start to which add to are next additional get we we to associated does of there assuming there small although some

on not XXXX. today. early terms even of top given comment in of obviously know that us we’re you to know you on for guidance specific cadence, So very XXXX is just It

you need seasonal versus in trend. outside expect higher quarter. So we’ve with closer the the the in to trends what get seen be a would we prior on third the know But and we specific little similar quarter of comment we underlying that, fourth year and to seasonality first before sales years, second to to

Margaret Kaczor

there few New a the Okay, Aera and of out that that category in then products reference, terms that I had have think is acquisition and been in you there. guys

model, have know then going and to looked evaluating that market, as your or to commercial sense and sense give is a competitive you if asset you margin that. your something advantage at which sell a into space, of the BXC, asset gives right So to then term, your that’s guys it and us was that easier can the do that in target, why ASP for POC, then the contributions you if on device know you you are you gross of at incorporate

market to unique your expect how And combination? to with in traditional more one tag do respond then guys just of to there, NIV you of know entering Thanks. kind the you players you kind

Scott Wilkinson

you I we oxygen strategy. New very our with think complimentary and have perfectly but with only portfolio also is that go-to-market the technology mean Aera that today, product Yeah, our we fits know not product

kind use, also is that we that the it, simplicity patient in POCs. know for our designed study peer-reviewed formula great they not liked ease it’s efficacy, but thing about its success and only this proven You about which for you clinical study, know preference it’s of is product and the our, of the ran,

think that we force, leads current as Canada; it’s generate that because we marketing New many product would that the be sales well Aera can the spend, a as now of our right our it’s we leverage for product. So

fits So it It’s expertise an and area we can in for so some services, to know oxygen our where get you close leverage acquisition, therapy first home. respiratory we have there.

can isn’t but that us we have years. that really upstream into need retail get last that where portion model think we’ve we ventilation basic that for over great fit opportunity patients coverage markets, to us criteria a the anything downstream but COPD therapy, allows we proven of have or also oxygen XX the retail impact they really in any a non-invasive there adjacent patients sicker some a ventilation it’s also of and for It the under, breathlessness, addition that to where the in

again, nicely with So we our where think that fits are competency core we unique. and

the front we to we get a fits in and physician sales fit that it big a pulmonary jump it As they rehab in that force, sell could nicely in, showcase role it think it would to some product can mentioned think our far be channels of play obviously know there, consumer will get perfect the doctors, I facilities. something as start direct and exposure we also just for you

limited seen that the that actually sales already has very in New We’ve Aera had.

to the that sense You to take know would small just they horsepower last FDA that and got year had that point stage, of and more somebody to themselves. where rather off develop to amount you then they their know this commercial hand clearance made than to started a it a that products got sell

products comparative kind gone know going that is again, remains destruction. have NIV pressure, program patients, think just be cost. this know we like you you concept community important downward access We said as community, there’s Lastly, opportunity use we business-to-business this more that to we’ll broaden to do the is also that and we it It’s forward, of there but want in program just where relatively do indeed reimbursement patient look POC’s. through bidding as for like you think preferred, to included POCs. product to in to it’s that if I cost sell We the to low that

probably TAV other strategy, a that far strong in you are know, what leader, we’ve know as POCs people of go product going we’re a a as that’s market think, answer to to I’d to competitor they’re as they going all and I think – the take to got think. going technology. to But You rather unique that horsepower we’ve full market leverage shown we’re advantage what of

Margaret Kaczor

Alright, thank you guys.

Operator

question question. Please go with Piper from Our from McKim JP comes next Jaffray. ahead your

JP McKim

me help with playing and down around model, get I’m good to and just to get question. Could going guidance? just there. me of grow? QX international Hi, you for Is for I segment just hard the that’s kind thanks only it’s – to my morning taking the

Ali Bauerlein

the guidance down in X, debt did X. change effective QX both that Rental change domestic the to don’t headwind effective we and expect in be were a BXB have rates but the on accounting that we January there, was strong year-over-year. January that a give specific that’s So say DXC we both and and bad associated call will also the with just

all QX. be grow So those headwinds us for will to in

JP McKim

to kind wanted I ask and Okay, one. then of

on attrition of I as thought. their there down think changed hasn’t issues similar business more But like side, well. and ramp that me is quickly seemed like there selling makes get DTC terms resellers fact the ramp direct like the as of think probably channel as the didn’t you maybe well internet are productivity in model the and like I

talk – anything little if a lead still closing sort can of business. there, growing that the and same know that on are the give So given are problem us resellers leads you more about confident that’s maybe you you if you can just could the or seeing growth, that that guys whether its,

Scott Wilkinson

mentioned reseller in didn’t traditionally as You my see they on see. we comments that internet the side, seasonality I know benefit the that

line on remember, Now that to bottom typically investing internet companies more that’s their growth, privately know the you resellers are, are model. they you know not generally focus growth, are they have you for owned than

and their things have we’ve see talk struggles visibility and don’t what on know obviously comment their you to we can you sales that exactly patterns what seen, and their We them about to leads we up-tick. see they because didn’t know are,

– weather across of of them pure usually if know consistently standpoint with similar when warms it You you know didn’t all a up. spring, up-tick bump a know stranger the it that the was a the coincide you we’ve is it from was what crummy; a you we we see past, pattern they usually look and colder This saw and that in pattern at it a up. it kind than weather in was spring weather seen little than that they have with

are deal a obviously pretty have metrics our our at expect inherent meeting If we right with our I now now. season what bring the be and I up you own curve you trying purchases successful we’ve those than with we’re go the dealt we anticipated, we that you not look lot expectations quarter. we you productivity have is than to more that consistent, our through the own with know kind said, of we of there it’s their that is the know would reps reps that were gains theirs. know know to have issues more know with that to of you higher know we as a to our a second tended back of you but visibility is and to got, disappointment, which one that we able unfortunately percentage drive that reps; were Now,

to you out dragging can many thousands going to know a it’s about many confidence we’ll growth opportunity, and we like us there, thousands, carrying execute many, plan, that what the of there’s patients And give month patients Again, many that generating the around so harvest tank sales be that more know a every would that’s tens do forward. leads job our of POC. you

we numbers you there. in say to therapy saturation if we more expanding that that use and know we’re we that have be reps and All back that thought our continue hitting grow we still the to growth. that capacity were oxygen a to obviously hiring drive point, capacity going sales room wouldn’t have we But to to

Ali Bauerlein

sub-section them point that also comp just a business the less of was domestic know on domestic their was point very total. the that third internet the you internet resellers want QX percent year-over-year. want QX the first toughest to all And a than very to bit saw BXB last I also strong our of our we as I number as of the onto so to that tough are in that a the of channel a the for add well, was say channel that out to I for want as the little of point out resellers, comp. BXB. year do resellers are

that So this the traditional segment. of is the segment vast BXB is a smaller majority, majority HME versus the purchases US

JP McKim

Thank you.

Operator

question Robbie ahead question. next comes go your Please JPMorgan. from with of Marcus Our

Robbie Marcus

question. you view. Thanks just was I know for your hoping touch on could you the

they So just let’s be reps causing it that’s them confidence than say that year gives the quality them. you differently high going to that act leads? said on leads, like that what would able to are know the you aren’t getting are You what them is able XXXX. in reps ones and act still able reps new hired on that be will high quality on confidence you What to have hiring ago, not act to they the be the gives forward a you’ll you

Scott Wilkinson

a Yeah, question good it’s Robbie.

of So again, at quarter, with things reps. the the they and you improve and that we and measure were part call performance the I our we second across at know what success the improving. as the seasoned actually the And of are year-over-year newer it’s make our if gain rates you looking know we apples-to-apples sure some close you the remained to really of to as we look seasoned able that their mean kind well productivity they that’s seasoned in productivity of that’s reps, reps, showed company. reps

been them cases against either know just to retrain But but our to we make same real transitioned productivity when it changes. successful, meet has hired Our where year-over-year, know our or our actually and lot the right hire just they frankly they them good you issue a the tried here comes the of we – some reps were improvement. to it some we’ve efforts we in XXXX, out down performance you some probably their with you and didn’t and of that took of successful, make newer are have know know redoubled we in them people, company, steps expectations that measure the of showing reps own didn’t eventually accord you not were and you

Ali Bauerlein

not it’s reps, leads, so older when that source. randomly quality specific distributed the like better the to on have are and territories bit, lead that reps reps we look Yeah, know have just elaborate at maybe they would to you and a performing the

The country. variety of from reps leads work a and from a variety will sources individual for rep the each or portions of

random lead can rep that that the you of nature, know look specific quality you a really class. at is of indications not pool how see you rep performing because in for may So seasoned

So that to I performance looking thing quality. think an at important understand and when is lead

Robbie Marcus

Okay.

last confidence I gives will you that and change so I and what Just that’s to the forward reps is the what new you seasoned forward. on will what will change are reps that, and things about what reps and follow than maybe going it going well up guess performing you that that hired more the the going guess be productive. change are to year different

Scott Wilkinson

we our know a hiring that in our so screening to have that mechanisms be, going of a good people you as know high to criteria, we’ve bring the changed are sure You possible, success. match probability as make

the, we that work a to XXX% training that we’ve intake know changed amount we’ve measuring hurt had give that that us back you certainly those against and you everybody of of support, to you the success hired areas couple so structure and we’ve we’ve work guarantee you that’s a we seeing had question where never it’s a higher know and a good classes those our is that hired you issues; the But we criteria, our we than course go of percentage program, changed your have and is Of one, classes past, support well confidence? people we hire in going classes changed out, know had already. out. gives what in I didn’t we’re

going are we three to also again, forward our in locations. all hire of Going

that them past. the we’ve make to you had side, and got boarding, that of much single those is classes infrastructure one time one-on-one that time found success we up as don’t one-on-one more smaller and our going we’ll them on hire the get kind give to hired formula follows that, that support we that that thing people in in training classes key we’ve another larger curve, enough so again through we’re management So coming sure and the know

Robbie Marcus

going to improvements, I if is could is we decline here, margins gets can start lot. And or a XXXX. up? operating in in seen be Thanks Ali back we’ve it just that back to to when positive year and it tick investment another sneak one more XXXX see What

Ali Bauerlein

being I expect with New to previous Yeah is and for want to that the do that numbers. us some I guidance from improvement in do wasn’t guidance. that XXXX able costs remind associated you a show change the of transaction portion Aera the

for execute needed on our Really what show to BXC do that and we marketing is to in is us what’s to sales improving order need margin. plan their efficiencies, improve overall operating

but and been showing on really particularly that, have area great sales R&D leverage marketing focus G&A, the and We going XXXX. to is improve into

Operator

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

Mike Matson

just I taking DTC my with wanted guess for the force. thanks to start sales I question. Yes,

imagine your I some let would if I I right? that’s but know significantly number there’s so me are one been turnover, probably So year-over-year, still numbers know guess, up

still left growth. which you two, could why fix fix there, reps you putting here. you to like that cart out seems productivity the the the would have problems start get that reps that before just you’re It going here increased and add before trying horse some I’d not more drive already maybe because issues adding imagine, by to know you go with try reps, more still haven’t the then over before the are turned or you And on

Ali Bauerlein

I’ll jump side. Yes, and so the I’ll then the first into strategy let question Scott take

XXXX. that headcount saw about representative of QX XX% compared of XXXX average sales in on we was the QX to down So

was significant and both. with to a improved was loss the that us, it capacity that on headwind of we’re So obviously basis offset for able year-over-year productivity of a

early side a we QX hired to and because DXC in reduction on smaller in fewer from people will year-over-year QX reps growth curve that headcount sales that of but improvement headcount headcount actual that QX since the curve, then headwind coming have of representative going last sales and QX up part a the significantly significantly a that of in year, a a you in side, non-seasoned we year-over-year into particularly the on stages and know of seasoned productivity basis challenge the was bigger QX, as down as On in of basis. get

Scott Wilkinson

hiring question And you to fix opposed struggling know back second Mike, why reps on part that actually before and issues, your the reps focus your of we’ve you as we that on process the that’s through. are the going wouldn’t worked

process. just where them, uncovered have peeling the you we training year things been for that that’s the working again our are struggling, our we onion – can frankly some job, that reps place. through But that’s weren’t the our say themselves process apply in. know it lest back deficiencies process, cut this in are reps they you of that the and first know Those with concluded were reps and out there’s You for and this where already concluded screening the and to with that support we attrition also half and working comes some fix really with issues also

been thought make to would it So that more know trying we more we’ve successful. turns those and reps successful you actually very than were, than out hard be we

all we’ve of those couple So I classes. hiring corrected said, those applied changes issues; to a fundamental as

new and on we in classes that’s know We’ve successful this have we’re hiring. our and location. started are those three why resuming We in seeing week weekend you of actually this classes

Mike Matson

of you’re your second rep was not here, my XX% year, where your down about math struggling in and you you the for half. added that half Okay, yet, I the first XX% the that with just in guess even last I’m saying you’re were lapping now and saying because understanding to count

– a So something? your a your reduction almost like sorry, in like XXX% XX% implies reps or in that reduction

Ali Bauerlein

in that of XX% no Yeah, XXXX the all increase we rep base. our was throughout saw our

at of XXXX went Again, net was XXX after end throughout XX% sales numbers so XXX So that at attrition, the reps increase those XXXX. are the XXXX. of we end of from to

a look our in those the increase we did XXXX were headcount of up periods. so see significant hiring Obviously at did the year in half as significant well. in When there in but hiring throughout our bump hire those XXXX, in we grounds, we trend, QX first was

Mike Matson

in first are in because year where you’re already and last essentially second down of the added the you but the that then completely more, reps half you half right gone last were from Okay, year.

Ali Bauerlein

we the well. have So as do standard business attrition in

get center is to you your inside back know deal already are level base with an call to to business. you having So attrition this that

numbers into the So that’s as built well.

Mike Matson

and do you balance the Alright, deal have where your would now, I of do fair stock sheet. done back and seen. consider down you you know a to M&A bit considerably, you you’ve is then decline given on want but cash understand that here the we’ve just buying a steep stock

Scott Wilkinson

the and continue Yeah, of growth. past us use to we is opportunities that drive that I had in to at look for growth we’ve mean capital and the best discussion think

Aera and it’s we is know know acquisition. to the go integrating You business first focus not that’s about harvesting going opportunity, short as term our on we’re approach leverage can right direct do where first growth Obviously back. New of and really the you and no, mentioned that to to future. in but our now, go-to-market and continue marketing drive consumer those to for buy we It’s patients disruptive a opportunities leverage direct consumers that of the to look unique plan expertise in to

Mike Matson

your that much of business. guess time some get the XX% that you and to some but some I to to that made business that part can something XX%, know I point. finally then are mean try I do revenue want update rental really of strategy. and part mean take the know it just us is about how of be of at you your could you promote going you big you Okay, comments become on will to but... I it, a there, how

Ali Bauerlein

that take I’ll so Yeah, one.

quarter know meant a wasn’t slight total change our said be did It call, a our first to as intake criteria. small on So we shift our to you strategy. large change, a we make in

team over would separate sales with are our think separate services from that increased So in on that will who the and on rentals coming that just a time. focus we out patients that combined interested having on team, drive rental intake focus rental that

build takes it time that rental to some intake up team. Now

out rental team. of build to we continued take to to end intake through but the for out us expect that that team, build have that this year We

why you will So that's expect, going when higher a really we XXXX at to see into contributing you start, know rental level. start is

be focus higher that sales that that focus. our so a will on as margin primary direct-to-consumer However, is the business still is us, for

revenue, in into or while it do rental expect XX% XX% to grow term. increase, we So to not is of medium revenue realistic near the

Scott Wilkinson

If they are really or access access extent let Yeah, that okay that you so obvious can to continue for make to patients, available rental than patients Mike, the depends grow, able add to pay to need our traditional insurance to know broader use, to it's want and And probably benefit us me are us, gives to product know you we HME it the community. the to readily does rental Medicare going product a that the a what using that. on know cash. more to you market,

patients know way a our if know they there, that it's blocked us make But rental then aren’t from the help you to hard. can they If we sure as quite probably market you don't to product. access push can't,

have have it’s access. patients is access, there of And that sure make to that a strategy so kind we

The is you we us lead the thing generate, that we’ve talked we drive efficiency more want it to and past, about and lets utilize know does that it the better that utilization. other in leads that

able it in we for, So to of our that more extent rentals, pay utilize we on to take of we that’s but leads fits those that business. how are more the kind

Mike Matson

helpful. you. that's Okay, Thank

Operator

comes next from from ahead Please go Matthew question. question Mishan And our with KeyBanc. your

Matthew Mishan

guys. for you me squeezing in Thank

there demand. work You’ve getting in you done year-over-year Is of a are volume here? increased headwind the factoring lot a pricing pricing on lower I point? elasticity just that and mean and a price is from of how

Ali Bauerlein

Yeah, pricing so we the lapping QX in trial. are

a where the quarter DXC of be for pricing versus year we should middle in clean pricing quarter us So we the the of a prior second saw last year. changed on in QX what side

been not has continue time. because a time. DXC another what a at But over to to know far competitive in have been both side, we not We pricing are We’ll currently concern offering. major at trial point you pricing do at pricing discount some the so look on priced products

Operator

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

Scott Wilkinson

Thank you.

productivity, committed restructuring increasing helping of of we care our sales home improving challenging While the Inogen, freedom enhancing this has are focused sales our their on been and we to mission therapy period for force, overcome a and independence force partners our challenges. are patients oxygen and

to leadership execute as Aera I New reiterate, into also for allowing goals market revenue plan XXXX. believe Thank excited expand in also to you out maintain we our time our to want very while us to growth opportunities are meet on your adjacent double to return the new position, market we about today. allows acquisition it and digit us to

Operator

end will today’s joining. We Ladies conference and call. you gentlemen, thank that for

You may now lines. disconnect your

Inogen (INGN) 7 Aug 192019 Q2 Earnings call transcript