Earnings call transcript Q2 2023

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Operator

Welcome to Inogen’s Second Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, August 7, 2023. I would now like to turn the call over to Agnes Lee, Senior Vice President of Investor Relations and Strategic Planning.

Agnes Lee

Thank you, Doug. Hello, everyone, and thank you for participating in today’s call.

call Kristin President Caltrider. the Shabshab CEO, on CFO, and me today and are Nabil Joining Earlier the XXXX. second Inogen quarter today, released of financial results for This financial package. Investor in company’s currently along earnings of website, supplemental section the the a with release is Relations available

sales statements the XXXX limitation, our and results related our our a beyond, including, products internal reminder, include for our statements, and and initiatives, financial regarding of business presented external term. expectations information As in of growth increasing and XXXX, will prospects today forward-looking without about teams, the for long productivity strategic and products supply including progress regarding both expectations strategy expectations market to and term the demand our innovation, on our for for short our our

most filed in obligation in periodic vary, forward-looking based involve this forward-looking that XXXX. update we disclaim and be X, by on with results currently Actual in date, of law. statements, more may and available These are as these required forth statements our call predictions the to to risks as today’s only any SEC. may information us and Forward-looking August set detail recent uncertainties except statements are are reports

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

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

Shabshab. With that, President and the Nabil Inogen’s call I to CEO, Nabil? turn will over

Nabil Shabshab

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

quarter, we Then relates around call, our way our an for work high-level outlook today’s how on guidance that like and will would take to walk of we provide call. our will who at your through details the annual the performance our to update and our end questions progress comments and transition to we before financial During through in of mitigation plans. performance our XXXX Kristin, the the

quarter. have made of we while our disappointed with are summary, execution we In this commercial the progress with the strategy, performance

DTC U.S. key mainly headwinds to Our in predominantly revenue to the fell short, accounts, due factors: for the and two improvement. despite a with progress due slower-than-expected on quarter few the continued primarily our sequential initiatives productivity

be of hence, $XXX $XX revenue limit might on to our year Considering XXXX understanding that focus the longer full cost the now mitigation year. actions to in are the to shortfall containment to the expectations EBITDA million adjusted expecting balance for range million. for in to $XXX to million. be million quarter of and materialize, the revenue us impact expected revenue, on within the and Despite take our the we EBITDA adjusted a this of decrease than expected resetting $XX range allows loss the is

is some oxygen we therapy our quarter long-term like stable for revenue slowly actions in impacted through the demand and that patient would talking to time now recovering. believe that I taking. factors spend the remains We and are

to this capital continue especially customers. borrowing, relating competitive Coupled in accretion. face cost to with some some impact margin our to focused activities, deployment, while continued pressures with pricing customers of performance, our channel, However, large BXB the aggressive of on

share lower-cost demand. higher that to This not us aggressively to we meet for of mid-XXXX and subsequently fully BXB from most push were XXXX by U.S. competitors to back prioritize channel. the related gains but aggressive into able supply competitive could were end remediate orders We during deliver saw constraints chain of prolonged increased opportunity tactics able when through for The the of into period the but to QX in XXXX. to pricing revenue market necessary required channels availability orders margin provided semiconductor of back a QX an and XXXX

our now Based had some a than this on impact understand resulting our bigger analysis, we backlog we and on expected. the that circumstances had accounts of key

new focus customers. business been lost accounts well as has the regaining some in of on Our key as winning

and delivering strong quality Our cost customers enduring include our recognition, a through aftersales best-in-class prescriber strategy of brand total benefits to model, service. patient and in BXB very top-tier ownership device channels high

lost is back to proposition value incrementally as well strong allowing business win win us the Our as accounts. some of new

benefits on therapy focusing around the oxygen price. of deliver Inogen’s are value non-delivery the acquisition model of uni-dimensional ability advancing customer to benefits long-term conviction beyond the lower consistently and We

how years. of Additionally, beyond value partnerships the in and populations the business our efforts include development patient X via that the product result to access our expand X customers and introductions investment could next future now customers’ innovations new with of Inogen’s indications to COPD BXB as over

is in total delivering customers Inogen’s recent due BXB relates life better critical cover are us new as a value X our both that regulatory an approved the of of and a strengthens We life. expected cost Rove to service with X-year POC our a to element necessary X-year return expected current will commercialize ownership. by it proposition completion the to GX to pleased also also The an as service POC allow steps further cases, to optimized

our to business. direct-to-consumer Moving

and measured focused have new per achieving productivity growth we scaling representative. as sales We DTC on remained disciplines the through scalable in towards work profitable

steady state believe have in the single-digit reduction and sequential both meet a aspirations growth XX leads. points in terms we and and result the percentage organization, to disciplines new institutionalizing reps revenue both of that that a closer improvements XXXX, sales sales sales delivered and set of to would XXXX rep DTC progress for and per number marketing unit about the us get in the remainder of revised low up with of in reduction We broader the channel, during us of productivity profitability. our strategy As management our double-digit on

For our our new with win drive international expand current proposition as value BXB customers we business to continue ones. as to well business,

launch been notified Rove progressing Our in have to that last Europe new X recently in signature has been the required remaining we France code and is well, the reimbursement publish secured.

even service sales referrals Inogen’s rep to We believe productivity expected revenue making the team also benefit Rental as BXB X-year role continues from stronger. compared to that in improved will play proposition X per increases for a life customers in value to prescriber double-digit with Rove QX.

and we per scale, sales growth. see to territories to and drive expect as call We frequency further to optimize continue progress account overall steady

In by could summary, generally opportunities transient we through short in in medium customers believe term nature headwinds existing with and while addressed and accounts. focusing challenges to working equally on in new BXB are winning be

profitability to the Part term, investments COPD. growth our EBITDA to organic beyond expenses during serve and investments, the managing and in part As at are forward plans we directed of growth maintaining our critical ongoing we indications XXXX. patient population adjusted path and the supporting provide revenue of medium while closely operating expanding are

clinically offering. to growth, with Physio-Assist for upon provide close a enter differentiated opportunity will to adjacency Additionally, through transaction, inorganic respect the of Inogen the clearance airway the an

to financial Inogen upon deployment a acquisition the patient’s met M&A and the earlier capital clinical, company. commercial, now access and require regulatory on focus clinical milestones lifetime respiratory to expanding deliver we on allow Physio-Assist This will hence patients executing efforts they value strategic our returns. and long-term expect pause and therapy, and for before our criteria, to the oxygen close, expected

results. I to Kristin? will the financial Kristin over of now turn a review call for

Kristin Caltrider

and sales a Nabil, good revenue $XX.X otherwise versus noted, The second international prior and to financial offset lower year increase primarily the comparisons by in the decrease an of XX.X% direct-to-consumer the XXXX U.S. quarter all sales, of period. period. rental revenue. prior decrease Total million, driven you, by everyone. Thank are sales Unless and partially was afternoon, was comparable for lower business-to-business

constant negative For exchange, revenue currency hedging, negative foreign a a impact total total of basis revenue. basis On decreased second on basis, XX.X%. on the point points a impact and second XXX revenue XX international quarter quarter, had net

limited considerably XX% down in quarter with to business-to-business of the Looking we at increase a was revenue that in Despite now It the that basis, shipments the period. comparable note second revenue been the channel. more quarter had $XX.X second the diminished. second due good compared in growth, constraints to revenue domestic increased to business-to-business sales to constraints that domestic of even have the supply XXXX larger million domestic in important the supply BXB quarter XXXX an $XX.X is expected on detailed million

prioritized shipments certificates period. pending quarter International as decreased million Europe million of international to $XX.X in due sales XX.X% we May higher EU the compared to $XX.X of MDD in in expiration XXXX BXB second were XXXX. of prior to Last year, sales the the to as

sales decrease, the Given our tough but expectations. were year-over-year we short comparable, expected a of

sales to Direct-to-consumer continue in sales inside as the this period, $XX.X and XXXX second channel. marketing prior from by million and the advertising decreased lower to profitability $XX.X in fewer primarily of volume XX.X% to spend in representatives driven quarter improved due sales million lower drive we towards

to XXXX in quarter second million from the in X.X% of $XX.X million period. Rental the revenue prior increased $XX.X

processes of growth continued improve reimbursement offset higher aged our revenue adjustments, rental partially and This receivables. service, patients seen by rental cleanup have and to in part We were rates. collections was on Medicare which work

impact gross margins. Total gross business-to-business from prices – quarter, was than the the and declining period points realized costs lower was XX.X% channel. benefit our Now second by more selling the as from margin on channel discuss the XXX component prior the to mix average in basis in selling offset U.S. unfavorable of lower

comparable was by in gross with sold quarter from a shift volume driven of units channel. was the paid was XXXX, revenue business-to-business points versus the primarily basis in of higher international pressure declining margin to pricing to domestic additional period, second Sales pricing mix through and the direct-to-consumer offset by XX.X% There channel XXX for a premiums the BXB components. lower impact channels. channel partially This business-to-business due the in

a gross the basis reimbursement primarily Medicare in and one-time by margin compression points. prior of second the of was XXXX quarter higher versus The Rental of rates. margin servicing XXX partially by XX.X% offset revenue costs the higher driven was revenue in XX.X% patient adjustments, period, rental decline impact

period, The macroeconomic we have compared the in charges result $XXX,XXX. and a current restructuring to The of included representing prior operating QX, acquisition-related on expense $XX.X decreased steps of mitigate in to of to a taken million of impact In XXXX. in million the totaling related quarter is decrease and other reduction spend expense. have headwinds to X.X%. we costs the encountered the Moving operating $XXX,XXX $XX.X total

million decreased period. charges, quarter compared to compared with excluding as operating XX.X% reduction Excluding expense prior operating $XX.X the $X.X one-time one-time reduced to expense the was of note, representing first a XXXX. the charges, by of million, Of

Going detail our the into quarter. in on second expenses more

We and of have work innovation in This $X.X million. second for to of our the intangible lower research continued quarter a the amortization to spend XX.X% due development with on of XXXX, spend was than total in through investment assets. primarily pipeline decrease quarter a

the the representing was expense million period reduction spending costs $XX.X The year. lower marketing in and channel. and primarily associated million, direct-to-consumer $X.X by decrease prior XX.X% driven advertising Sales with was our over an personnel-related median in

driven And fair million change million the for administrative a benefit earn-out increase prior general a year in prior $X QX, period, to with $X.X associated $XX.X increase value liability. as finally, primarily we of incurred compared representing in million expenses and from the a by

well incurred we costs offset Physio-Assist mentioned, activities as This in with partially the personnel-related decrease as associated As $XXX,XXX by in purchase diligence for legal for was $XXX,XXX expenses. restructuring charges and agreement. previously acquisition a

sequential a $XX.X actions is months XXXX, in first reported first improvement adjusted taken Adjusted a the of XXXX, net correlated loss reported $X.X and In of of loss a adjusted saving diluted we million loss year. X of an EBITDA quarter loss, the adjusted the that This an an million million. and per of reported per was share basis, with loss from of $X.X $X.XX. revenues we of share the $X.XX. and of we loss diluted net quarter second million On $X.X have a improvement cost a which EBITDA increased

on Moving sheet. to balance our

June equivalents and of XXXX, cash, of As marketable $XXX.X we million securities XX, with debt outstanding. had cash no

on components market, premium-priced purchased of on finished These and the items other and balance on in not goods. reside as sold yet open the sheet inventory carry current to chips as inventory continue assets. expense semiconductor four prepaid but We

QX in XXXX now cost of to our the As balances XX, through to impact sold XXXX, components the June Due was XXXX. million. premium continue prepaid to of and for early of goods value lower expect sales cost premium forecasted and volumes, potentially inventory the components price $X.X we into

turn our I will to now outlook. financial

we have channel. XXXX recent to our in results for expect loss will remainder to efforts to our profitability, line the we range challenges in We As actively guidance reduction year expectations year-to-date to our encountered an loss for as million and to business-to-business have the the well million expectations to in of remain revenue, cost continue adjusted revenue on Street us we will on reflect decrease company focused current EBITDA our and Nabil the allow the We year full in year. a for the $XXX of expenses full the deliver our return channel XXXX. adjusted in with $XX $XXX million $XX the based as large manage now direct-to-consumer our to range mentioned, be are our Despite updating of million. total

happy to your questions. will And with that, take we be

Operator

question Blackman with of Thank Please with the Instructions] question. you. Our [Operator proceed Matthew first line Stifel. your from comes

Unidentified Analyst

Colin Hi, slower things just just for guidance. are moving the lines. turn encountering context guys does new challenges you guide that on to of efforts start have not than Are one this to you wanted is you around the I foreseen. imply Or anticipated? broader business Matt. various on What may your the with in

For regarding anything outlook? rep has Thanks. your example, productivity changed

Nabil Shabshab

Colin, Thank I’ll question. you, the take

challenges, not are any seeing to new point. we So your

challenges is like In as healthy respect and QX BXB terms is And lower a indications productivity, channel. in seats. the the terms both a the the QX channel reminder, BXB guideline progress a where actually Again, little it profitability number we had is, more but that related indicated, channel. of productivity focused growth productivity bit And productivity in actually that of to but DTC that DTC progress perspective, very is albeit for some very to people and encouraging pronounced positive the mainly rep rep in as to are to be bit from the of a in to slower channel. the DTC, there in even trying though slower, new achieve very my little challenges it’s generation. prescriber us. versus The well increase we encouraging a revenue there are expected The in on we per relates are and directly as the with

Unidentified Analyst

quarter take from mentioned, fourth little back given expect And a XQ of those in on should for start BXB just kind things dynamics Okay. bit back getting we step quarter. you track to a the second the

Just what should we expect from a cadence standpoint there?

Nabil Shabshab

be Yes. step back a Potentially, there small might in QX.

a little maybe think elaborate I me bit. let

of are back bit accounts. That’s opportunities said our remarks, challenges, why that had number. winning in very well judicious So, in as we of With been we seeing expected. accounts through the work as it to about BXB some new we but have the than that might also lost promising win good a with progress ability down said, longer of customers, the as calling terms the progress in some we the the take little large prepared we like we

larger, think of in more mentioned is we remarks, also some we bit accounts, losses will little take the nevertheless, like Now, it our expected. than a progress. longer concentrated there but in We are

Unidentified Analyst

Okay. Thank you.

Nabil Shabshab

Thanks.

Operator

comes Our of next with Marcus JPMorgan. from the Robbie Please your question question. with line proceed

Unidentified Analyst

seeing are Can Hi. bit on little Lilia Thanks This more about sounds like you what for improving. It actually in for taking question. is the talk you productivity a is Robbie. DTC?

is guess headcount I So, really issue there. the

you here? to size about we how the of stabilizing? can the And when sales So, from force turnover growing expect start are thinking

Nabil Shabshab

to made am have I that back to comments Thank going Yes. before. publicly maybe you, Lilia. go we

be in naturally or your it stabilize. the think indicated to that dial a we terms recently give plus going of honesty, that is closer are but sales little of churn XX%. number do accountability the as be of regrettable the encouraging. in and expectations, XXX productivity Just XXX people. in your or in to here new the had take The range part rep. is as well unit To reminder, actually range, there specifically, It’s revenue where as it’s very seats, go minus per plus we point, productivity to the We terms both back productivity this of all XX%, to the used in expected. we that into as the to of But had reps all question, we is bit more other up you is not and going a

As but us. as were of the at the Hence, be balance to growth, It’s a with indication reduction there that is plan part and seats good think our we some we progress of long-range advertising, mentioned, get in unique right are will to What between go-to-market in a the channel we we salespeople effort an that differentiates do of continue will that that we making progress give of spend right XXXX, is part in as leads to trying our against for we in are increased always said, that on. that we the generate from DTC channel a profitability but that the strategy. perspective. early be of and will terms in to where price seeing an through compensate well revenue as reduction to productivity

Unidentified Analyst

Do update just back you your state do And you with rest it. you through can give of an normal you get of as feel visibility a Thanks That’s And helpful. when you us year? on suppliers? to supply good so Got patterns follow-up, have ordering think then the the the environment. can much. the

Nabil Shabshab

Yes.

there products forward, as that unless which a not of There source, in there would something trending characterize I few here we for think concern is huge be. expect but that us changes moving normally. issues to we to a material major are are there with trying specific I is, state the general supply are lag, no it So, and don’t very the

So, in this supply-constrained in we – is a general. are environment not

Unidentified Analyst

Thank you. Great.

Nabil Shabshab

Thanks Lilia.

Operator

of KeyBanc Please Markets. Our next the question proceed Mishan line with Capital comes your from with Matthew question.

Brett Krizman

Hi Matt. this Wanted today Thanks guys. start as prepared remarks a well. much touched Rove This the is during for the you X question announcement off on the for morning questions. to on Brett so taking that regarding on

you for the a extended around the through And now anything revenue, does given service or an there, And changing improvement warranty follow-up mean that that change value what’s curious will product warranty? proposition the have could the around ASPs given there? economics as life. Just if does walk X-year Inogen around the

Nabil Shabshab

you, will also. that I Matt. Thank question Yes. take

So, characterization. let me start with the

So, important of very we but think Rove X XXXX setting new the larger is in platform update six it’s an actually it GX, of around is said us for to innovation for a the terms of as coming device. than that

improvements through cannula the as the this the capability well as in alarming are device basically the interface, placement. So, user

said, critical. managed expected we that service the with service to achieve really life which So, also X-year an is life, of

If have it’s that are that and – customer a on about for think if capital device versus has a is that from return thinking perspective years BXB approved you buy you you in able you very important to the fleet regulatory a the to of label. a POC, invested be of and X are you X-year a label

before in stronger. X-year about expected to have an yet the marketplace. to we know we that we the devices that very And are are get the service value life don’t drive of So, proposition knowledge, excited fact our continues other any to trying

the service as Europe. today, service sense X-year very and X-year your in allow question we don’t X-year can a to the own to service in ourselves large but now and support. like devices devices well believe And an beyond going the we – about both the we a and important customers warranty, are device as have key do intention expires the we the here potentially warranty that Back warranty, stay will we extend warranty – right that like within parts So, as other X-year people providing the for allow by that warranty those the them after on we will with as that’s well they years their have X us. to applies

Brett Krizman

sales there channel, this Alright. just Got a underlying level one of helpful. levels. we little what say would And summer any see a the from That’s the at could answer, of Like tough about touch reps? to little just back, a on demand, early maybe on proceeded – especially into a that as you might very take point maybe you to give of see might be year just then patient force in maybe up? more positivity especially can step you it. some can demand but typically next like sales stripping a bit months the a the are perspective, number would we direct-to-consumer into lower an when trying changes back to just of step signs you in what positive Like

Nabil Shabshab

Yes.

So for question. Brett, thanks the

ability me let partially have the see terms else, the that premium to that the price in more be successively the serve is don’t they than intended reminder, have we the coverage, insurance-based we price that patients there I can pricing taken, the for through anything honestly called that, despite value and to and positive think which took last out were I we with to increases sort channel of DTC in to And you first. for continues see start are intended price increases productivity cover a option X.X the demand semiconductors. of that continue year. the as Despite there to any –

don’t So, any softness from see demand a I that. in perspective,

the getting people general, me other respect rates of to in transition that look if business. – second let slowly. steady I demand you are the diagnosed the prescribed, of to at the part and it’s in recovering and actually think With BXB, prescription

of What is of BXB demand the I return we in the people willingness, and preceding would remarks, the the is prepared a of there little we in a as nature price the it quarter other transient like again, there. deploy label said and terms in starting where as way in then customers that now on of bit look look saying, the a about borrowing capital. sort their model. acquisition from to is So, quarter that to as at the But around well cost this in and saw slowly sure perspective, capital, patient different are turn to they way and making get a softness

we believe what believe normal on into is level we track back channel getting So, a of the and start slowly will the demand BXB demand also.

Brett Krizman

Thanks taking lot the a questions. Alright. for

Nabil Shabshab

Brett. worry, No

Operator

are There further the like I to no for queue. it Mr. in back questions Shabshab remarks. would closing to hand

Nabil Shabshab

focused you. through In improving growth and company sustainable we the beyond for Thank innovation near-term, on are our commercial COPD profitability. execution, portfolio strengthening our positioning the and

transformational Clearance driving committed for and the with Our we journey patients, portfolio, remain long-term an our and Airway shareholders organically continues, to expanded value and to customers solutions. medium including over

of I As Inogen. in extremely proud short-term Thank driving building while team’s eventually care respiratory while collective effort to interest exciting support lives again, like growth these improving for and for your fulfilling I your the patients’ us. an investors of to am our remains needed I work true purpose thank afternoon. through our and conclude, capabilities, profitability would you continually all through improving your enjoy Inogen of challenges, our execution north and

Operator

does this today’s your you gentlemen, for teleconference. and Ladies conclude participation. Thank

wonderful may time and this have at day. your You lines a disconnect

Inogen (INGN) 7 Aug 232023 Q2 Earnings call transcript