Q4 2023 Inogen Inc Earnings Call
Speaker Change: [music].
Operator: Greetings and welcome to the 2023 4th Quarter Financial Results. At this time, all participants are in. This has been a brief question and answer session. We'll follow the formal. If anyone should require operators..., press star zero on your.
Greetings and welcome to the Inogen 2023 fourth quarter financial results call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal.
Presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Marissa Beisch. Gilmartin.
As a reminder, this conference is being recorded.
Gilmartin: It is now my pleasure to introduce your host, whereas our base from Gilmartin group.
Marissa Beisch: Great, thank you all for participating in today's call. Joining me are President and CEO Kevin Smith and Interim CFO Mike Sergisgetter. Earlier today, Inogen released financial results for the fourth quarter of 2023 and full year 2023.
Gilmartin group: You may begin.
Gilmartin group: Great. Thank you all for participating in today's call. Joining me are president and CEO, Kevin Smith, and interim CFO Mike's there just better.
Gilmartin group: Earlier today and are generally financial results for the fourth quarter of 2023, and four you're funny to me three.
Marissa Beisch: This earnings release is available in the investor relations section of the company's website along with a supplemental financial package. As a reminder, the information presented today will include forward-looking statements, including, without limitation, statements about our growth prospects and strategy for 2024 and beyond, expectations related to our financial results for 2024, progress of our strategic initiatives, including innovation, our expectations regarding the market for our products, our business supply, and demand for our products, in both the short and long term. The forward-looking statements in this call are based on information currently available to us as of today's date, February 27, 2024. These forward-looking statements are only predictions and involve risks and uncertainties that are set forth in more detail in our most recent periodic report filed with the Securities and Exchange Commission.
Gilmartin group: This earnings release is available on the Investor Relations section of the Companys website, along with a supplemental financial package.
Gilmartin group: As a reminder, the information presented today will include forward looking statements, including without limitation statements about our growth prospects and strategy for 'twenty 'twenty, four and beyond expectations related to our financial results for 'twenty 'twenty four progress of our strategic initiatives, including innovation, our expectations regarding the market for our products.
Gilmartin group: Our business supply and demand for our products.
Gilmartin group: Both the short and long term.
Gilmartin group: The forward looking statements in this call are based on information currently available to US as of today's date February 25 in 2024.
Gilmartin group: These forward looking statements are only predictions and involve risks and uncertainties that are set forth in more detail in our most recent periodic report filed with the Securities and Exchange Commission.
Marissa Beisch: Our full results may vary, and we disclaim any obligation to update these forward-looking statements, except as may be required by law. We have posted historical financial statements and our investor presentations in the Investor Relations section of the company's website. Please refer to these files for more detailed information.
Gilmartin group: Actual results may vary and we disclaim any obligation to update these forward looking statements, except as maybe required by law, we have posted historical financial statements and our investor presentation in the Investor Relations section of the company's website.
Gilmartin group: Please refer to these files for more detailed information.
Marissa Beisch: During the call, we will also present certain financial information on a non-GAAP basis. Management believes that non-GAAP financial measures, taken in conjunction with U.S. GAAP financial measures, provide useful information for both management and investors by excluding certain non-cash items and other expenses that are not indicative of Inogen's core operating results. Management uses non-GAAP measures internally to understand, manage, and evaluate our business and make operating decisions. Reconciliations between U.S. GAAP and non-GAAP results are presented in tables within our earnings release.
Gilmartin group: During the call. We will also present certain financial information on a non-GAAP basis management believes that non-GAAP financial measures taken in conjunction with U S. GAAP financial measures provide useful information for both management and investors by excluding certain noncash items and other expenses that are not indicative of imaging core operating results.
Gilmartin group: Management uses non-GAAP measures internally to understand manage and evaluate our business and make operating decisions.
Gilmartin group: Reconciliations between U S GAAP and non-GAAP results are presented in tables within our earnings release.
Michael Stephen Matson: And with that, I will turn the call over to Inogen's president and CEO, Kevin Smith. Good afternoon, and thank you for joining our fourth quarter 2023 conference. During today's call, I will provide insight into my experiences during my first month as CEO, outline our strategic priorities going forward, and share a few highlights from the recent. I'm pleased to be leading my first earnings call here at Inogen. We have a great team and a great product portfolio. During my first month as CEO, I observed and reflected on the strengths and challenges within our business, seeking substantial internal and external feedback regarding our portfolio, strategy, sales structure, field organization, and performance. I have spent much of my time visiting our global teams, investors, and management to understand the company from its roots. From my conversations with our leaders, I have immense confidence in the opportunity ahead of the company and our capability to make improvements across the board. As I strategize our path forward, I'm pleased to welcome two additional new leaders to our team. We are thrilled to have appointed Greg Ramond as Chief Commercial Officer in January.
Gilmartin group: And with that I will turn the call over to Anna <unk>, President and CEO, Kevin Smith.
Anna: Good afternoon, and thank you for joining our fourth quarter 2023 conference call.
Anna: During today's call I will provide insight into my experiences during my first months as CEO.
Anna: Outline our strategic priorities going forward.
Speaker Change: Share a few highlights from the recent quarter.
Anna: I'm pleased to be leading my first earnings call as you would imagine we have a great team and a great product portfolio.
Anna: During my first months as CEO I have observed and reflected on the strengths and challenges within our business seeking substantial internal and external feedback regarding our portfolio strategy sales structure field organization and performance.
Anna: I have spent much of my time visiting our global teams investors and management to understand the company from its roots.
Anna: From my conversations with our leaders ever men's confidence and the opportunity ahead of the company.
Anna: Capability to make improvements across the business.
Anna: As I strategize, our path forward I am pleased to welcome two additional new leaders to our team. We are thrilled to have appointed Greg remind as chief commercial officer in January Greg's experience will help improve <unk> products commercial strategy and customer experience. We also look forward to bringing on Michael Bourque is our new CFO, whose appointment we announced.
Michael Stephen Matson: Greg's experience will help improve Inogen's products, commercial strategy, and customer experience. We also look forward to bringing on Michael Bork as our new CFO, whose appointment we announced in late January. Michael will be joining the company effective next week, March 4th, strengthening our finance organization and stewarding our accounting and FP&A. I am confident that both of their additions are a step toward achieving Inogen's full potential.
Anna: Alex in late January Michael will be joining the company effective next week March 4th strengthening our finance organization and Stewarding, our accounting and S. P. N Atms I am confident that both of their additions are a step towards achieving its full potential.
Michael Stephen Matson: I would like to share insights on Inogen's Strategic Priorities going forward. Our top priority is positioning the business for revenue. An important piece of this process is the pursuit of regulatory clearance for physio-assist introduction to U.S. Medicaid.
Anna: I would like to share insights and the energen strategic priorities going forward.
Anna: Top priority is positioning the business for revenue growth.
Anna: An important piece of this process.
Anna: Pursuit of regulatory clearance for physio assessed introduction to the U S market.
Michael Stephen Matson: PhysioAssist represents an exciting opportunity to expand our portfolio, increasing our ability to impact the lives of existing and new patients. We remain optimistic about our ability to achieve clearance, and we'll be providing updates as they become available. We will also be pursuing a return to sustainable profitability in the coming years. To this end, we are evaluating the optimization of our production and cost record, with the intent to improve the cost of government. Advancing our innovation pipeline with transformative technologies is also a key player. We are advancing development to make our products more accessible, mobile, and effective. This includes innovation within our digital health portfolio. Inogen devices are known for their superior patient compliance, monitoring, and diagnostic capability.
Anna: So as he always says represents an exciting opportunity to expand our portfolio <unk>.
Anna: Increasing our ability to impact the lives of existing and new patients.
Anna: We remain optimistic about our ability to achieve clearance, we won't be providing updates as they are available.
Anna: We will also be pursuing return to sustainable profitability in the coming years to this end, we are evaluating optimization of our production and cost structures with the intent to improve the cost of goods sold.
Anna: Advancing our innovation pipeline with transformative technologies.
Anna: Also a key priority.
Anna: Our advancing development to make our products more accessible mobile and affected.
Anna: This includes the innovation within our digital health portfolio.
Anna: Energen devices are known for their superior patient compliance monitoring and diagnostic capabilities.
Michael Stephen Matson: And we know that continued investment in our platforms to improve their ease of use and cost effectiveness can take us even further with our business-to-business partners, further establishing patient and provider preference, and will, in tandem with all of these efforts. Inogen will continue to bring best-in-class POCs to the market, evaluate our sales strategies, and strengthen our relationships with distributors and stakeholders in new and existing markets. We remain dedicated to delivering the highest quality, most dependable, and most advanced respiratory therapies to patients around the world. Now, I would like to highlight our accomplishments during the fourth quarter and full year 2025. We achieved $76 million in total fourth-quarter revenue and $316 million in fiscal year 2023.
Anna: And we know that continued investment in our platforms to improve the ease of use and cost effectiveness can take us even further with a business to business partners further establishing patient and provider preference and loyalty.
Anna: And in tandem with all of these efforts engine will continue to bring best in class POC as to the market evaluate our sales strategies and strengthen our relationships with distributors and stakeholders in new and existing markets.
Anna: We remain dedicated to delivering the highest quality most dependable and most advanced respiratory therapies to patients around the globe.
Anna: Now I would like to highlight our accomplishments during the fourth quarter and full year 2023.
Anna: We achieved 76 million in total fourth quarter revenue and $316 million in fiscal year 2023 revenue.
Michael Stephen Matson: Our recent sales were, in part, driven by the full launch of Rogue Six in Europe, which is progressing along well with our expectations. We have followed our 2023 achievements with several areas of progress in early 2024. For example, we saw a compelling conclusion supporting the adoption of POCs through a recently completed real-world evidence study. The study analyzed the effectiveness, burden, and cost of illness of over 380,000 long-term oxygen therapies.
Anna: Our recent sales were in part driven by the full launch of Euro six in Europe, which is progressing along with our expectations.
Anna: We have followed our 2023 achievements with several areas of progress in early 2024.
Anna: For example, we saw a compelling conclusions supporting the adoption of Poc's through our recently completed real World evidence study this.
Anna: The study analyze the effectiveness burden and cost of illness of over 380000 long term oxygen therapy patients.
Michael Stephen Matson: Baseline mobility was strongly correlated to lower risk of mortality over a 72-month period, and mobile patients using POCs with higher duration of autonomy and nine months longer median overall support had lower risks of hospitalizations in ER beds, and consequently lower health care resource utilization costs than patients using POCs with shorter duration. This further reinforces that patient mobility is key to their health and well-being, and using devices that are compatible with it and do not restrict it has clear benefits. At Inogen, we take pride in the mobility our devices offer patients. We are always striving to find ways to improve mobility through battery life, device size, and weight to improve patient outcomes.
Anna: Baseline mobility was strongly correlated to lower risk of mortality over 72 month period.
Anna: And mobile patients using poc's with higher duration of autonomy at nine months longer median overall survival.
Anna: Lower risks of hospitalizations in the yard visits.
Anna: Consequently, lower health care resource utilization costs and patients using <unk> with shorter duration of our time.
Anna: This further reinforces that patient mobility is key to their health and wellbeing and using the devices that are compatible with it and do not restrict it have clear benefits.
Energen: And energen, we take pride in the mobility of our devices offer patients. We are always striving to find ways to improve mobility suite battery life device size and weight to improve patient outcomes.
Michael Stephen Matson: In early February, we rolled out updates for our connected app and service portals to provide better patient monitoring and user experiences for our customers and business-to-business partners. Changes included the ability to connect to wearable diagnostic devices, the ability to track patient breaths per minute, and error maintenance notifications linked to specific devices.
Energen: In early February we rolled out updates for our connected apps and service portals to provide better patient monitoring and user experiences for our customers and business to business partners.
Energen: Changes included the ability to connect to wearable diagnostic devices.
Energen: The ability to track patient breaths per minute.
Energen: Aaron maintenance notifications linked to specific devices.
Michael Stephen Matson: These changes are part of our broader effort to make sure Inogen devices are not only dependable but also practical for all users. In addition, we have initiated a shift within our rental channel in which we run our POCs via prescriber referral. As part of a continued effort to improve our rental process, expand the rental channel, and increase our forecasting and predictability, we are moving away from one of our external sales partnerships and bringing support for prescriber rentals in-house. I believe this is an important step to ensure that we are able to assist as many patients as possible. As always, we will continue to evaluate all of our business relationships and look for opportunities to streamline our cost sharing. Before I turn the call over to Mike,
Energen: These changes are part of our broader effort to make sure imaging devices are not only dependable, but also practical for all users.
Energen: In addition, we have initiated a shift within our rental channel can achieve under Pnc's prescriber referrals.
Energen: As part of our continued effort to improve our rental process expand the rental channel and increase our forecasting and predictability. We are moving away from one of our external sales partnerships and bringing support for prescriber rentals in house.
Energen: I believe this is an important step ensuring we're able to assist as many patients as possible.
Energen: As always we will continue to evaluate all of our business relationships and look for opportunities to streamline our cost structure.
Energen: Before I turn the call over to Mike.
Michael Stephen Matson: I'd like to address the news of a recent competitor exiting the market. Due to this development, we are seeing some volatility in the domestic business-to-business channel, but we also see the potential opportunity to capitalize on market leadership through a differentiated product offering and brand recognition.
Mike: I'd like to address the news of a recent competitor exiting the market.
Mike: Due to this development, we are seeing some volatility in the domestic business to business channel.
Mike: We also see the potential opportunity to capitalize on our market leadership.
Mike: Differentiated product offering and brand recognition.
Mike Matson: We expect that there may be a void in the market, and if so, we will be ready to step in and fill it. Now, I turn the call over to Mike for a more detailed review of our finances. Mike.
Mike: We expect that there may be a void in the market and if so we will be ready to step in and fill it.
Mike: I'll now turn the call over to Mike for a more detailed review of our financial results Mike.
Mike Matson: Thank you, Kevin, and good afternoon, everyone. Unless otherwise noted, all financial comparisons are to the prior year comparable period. Total revenue for the fourth quarter of 2023 was $75.9 million, a decrease of 13.8% versus the prior year period. The decline was primarily driven by a decrease in domestic business-to-business sales and direct-to-consumer sales, partially offset by higher rental revenue.
Mike: Thank you, Kevin and good afternoon, everyone.
Mike: Unless otherwise noted all financial comparisons are to the prior year comparable period.
Mike: Total revenue for the fourth quarter of 2023 was $75 $9 million, a decrease of 13, 8% versus the prior year period.
Mike: The decline was primarily driven by a decrease in domestic business to business sales and direct to consumer sales.
Mike: Really offset by higher rental revenues.
Mike Matson: By the fourth quarter, foreign exchange had a negative 50 basis point impact on total revenue and a negative 140 basis point impact on international revenue. Looking at fourth-quarter revenue on a more detailed basis, direct-to-consumer sales decreased 21.6% to $19.8 million in the fourth quarter of 2023 from $25.3 million in the prior period, driven primarily by fewer representatives, partially offset by higher rep productivity. Domestic business and business revenue decreased 33.6% to $18.1 million in the fourth quarter of 2023, compared with $27.2 million in the comparable period, driven by competitive pricing pressure, increased cost of capital, and HME expense management. International business to business revenue increased 4% to $21.5 million in the fourth quarter of 2023, compared to $20.7 million in the prior period, primarily driven by the addition of physio-assist semi-ox sales revenue, Rental revenue increased 10.6% to $16.5 million in the fourth quarter of 2023 from $14.9 million in the prior period. Growth was driven primarily by an increase in the number of patients on service.
Mike: For the fourth quarter Foreign exchange had a negative 50 basis point impact on total revenue and a negative 140 basis point impact on international revenue.
Mike: Looking at fourth quarter revenue on a more detailed basis.
Mike: Direct to consumer sales decreased 21, 6% to $19 $8 million in the fourth quarter of 2023.
Mike: $25 $3 million in the prior period, driven primarily by fewer representatives, partially offset by higher rep productivity.
Mike: Domestic business to business revenue decreased 33, 6% to $18 $1 million in the fourth quarter of 2023, compared with $27 $2 million in the comparable period, driven by competitive pricing pressure increased cost of capital and H M D expense management.
Mike: International business to business revenue increased 4% to $21.5 million in the fourth quarter of 2023 compared to $27 million in the prior period, primarily driven by the addition of physio to semi oxy sales revenue partially offset.
Mike: By competitive pricing pressure and an increasing cost of capital.
Mike: Rental revenue increased 10, 6% to $16 $5 million in the fourth quarter of 2023 from $14 $9 million in the prior period growth was driven primarily by an increase in the number of patients on service.
Mike Matson: Now on to our gross margin. Total gross margin was 37.1% in the fourth quarter, increasing 360 basis points from the prior period, primarily driven by lower premiums paid for components, warranty costs, and labor and overhead costs, partially offset by higher inventory-related losses. Sales revenue gross margin was 32.8%, an increase of 350 basis points, driven primarily by lower component and labor costs. Rental revenue gross margin was 52.7%, a decline of 120 basis points, primarily due to decreased reimbursement rates relating to insurance coverage mix, as well as higher servicing costs.
Mike: Now onto our gross margins total gross margin was 37, 1% in the fourth quarter, increasing 360 basis points from the prior period, primarily driven by lower premiums paid for components warranty cost and labor and overhead costs, partially offset by higher inventory.
Mike: <unk> losses.
Mike: Sales revenue gross margin was 32, 8% an increase of 350 basis points, driven primarily by lower component costs.
Mike: Rental revenue gross margin was 52, 7% a decline of 120 basis points.
Mike: Primarily due to decreased reimbursement rates relating to insurance coverage mix.
Mike: As well as higher servicing costs.
Mike Matson: We expect a modestly higher gross margin in the first quarter of 2024, relative to the fourth quarter of 2023, driven by labor efficiency and a lower impact from premium price components. Moving on to operating expense, in the fourth quarter, total operating expense decreased to $57.1 million compared to $88 million in the prior period, representing a decrease of 35%. The decrease was primarily due to the loss on disposal of an intangible asset of $52.2 million in the prior year period.
Mike: We expect a modestly higher gross margin in the first quarter of 2024 relative to the fourth quarter of 2023, driven by labor efficiency and lower impact from premium priced components.
Moving on to operating expense in the fourth quarter total operating expenses decreased to $57 $1 million compared to <unk>.
Mike: Compared to $88 million in the prior period, representing a decrease of 35%.
Mike: The decrease was primarily due to the loss on disposal of an intangible asset of $52 $2 million in the prior year period.
Mike Matson: Partially offset by the change in fair value of earn out liabilities and certain one-time costs related to the CEO transition and bad debt expense. In the fourth quarter of 2023, we reported a gap net loss of $26.6 million and a loss per diluted share of $1.14. On an adjusted basis, we reported a net loss of $19.4 million and an adjusted loss per diluted share of 83 cents. Adjusted EBITDA was lost at $17.3 million.
Mike: Partially offset by the change in fair value of earn out liabilities and certain one time costs.
Mike: Weighted to CEO transition and bad debt expense.
Mike: In the fourth quarter of 2023, we reported a GAAP net loss of $26 $6 million and a loss per diluted share of $1.14.
Mike: On an adjusted basis, we reported a net loss of $19 $4 million and an adjusted loss per diluted share of <unk> 83.
Mike: Adjusted EBITDA was a loss of $17 $3 million.
Mike Matson: Moving on to our balance sheet, as of December 31, 2023, we had cash, cash equivalents, and marketable securities of $128.5 million with no debt outstanding. Now, to touch on full year performance. Total revenue for the full year of 2023 was $315.7 million, a decrease of 16.3% versus the prior year period. The decrease was driven by declines in direct-to-consumer sales as well as domestic and international business-to-business sales, partially offset by higher rental revenue.
Mike: Moving on to our balance sheet as of December 31, 2023, we had cash cash equivalents and marketable securities of $128 $5 million with no debt outstanding.
Mike: Now to touch on full year performance.
Mike: Total revenue for the full year of 2023 was $315 $7 million, a decrease of 16, 3% versus the prior year period.
Mike: The decrease was driven by declines in direct to consumer sales as well as domestic and international business to business sales.
Mike: Partially offset by higher rental revenue.
Mike Matson: For the full year, foreign exchange had a negative 10 basis point impact on total revenue and a negative 40 basis point impact on international revenue. Total operating expense was $236.1 million compared to $238.8 million for the full year 2022, representing a decrease of 1.1 percent. Excluding the one-time non-cash impairment charge of $32.9 million in 2023 and the loss on disposal of intangible assets of $52.2 million in 2022, operating expense increased 8.9%, primarily driven by the change in the fair value of the earn-out liability. Gap net loss was $102.4 million compared to a gap net loss of $83.8 million for the full year 2022.
Mike: For the full year foreign exchange had a negative 10 basis point impact on total revenue.
The negative 40 basis point impact on international revenue.
Mike: Total operating expense was $236 $1 million compared to $238 $8 million for the full year 2022.
Mike: Representing a decrease of 1.1%.
Excluding the onetime noncash impairment charge of $32 $9 million in 2023, and the loss on disposal of intangible asset of $52 $2 million in 2022 operating expense increased to eight 9% primarily driven by the change in the fair value of.
Mike: The earn out liabilities.
Mike: GAAP net loss was $102 $4 million compared to a GAAP net loss of $83 $8 million for the full year 2022.
Mike Matson: Adjusted net loss was $48.3 million compared to an adjusted net loss of $26.2 million for the full year 2022. Adjusted EBITDA was a negative $37.8 million compared to a negative $13.5 million for the full year 2022. Before I turn the line back to Kevin, I would like to share our revenue expectations for the first quarter. We expect first quarter 2024 revenue of $73 million to $74 million, reflecting growth of 1% to 3% compared to the first quarter of 2023. With that, I will pass the call back to Kevin for his closing remarks. The start of 2024 opens a new chapter for energy.
Mike: Adjusted net loss was $48 $3 million compared to adjusted net loss of $26.2 million.
Mike: Full year 2022.
Mike: Adjusted EBITDA was a negative $37.8 million compared to a negative $13 $5 million for the full year 2022.
Speaker Change: Before I turn the line back to Kevin and I would like to hear our revenue expectations for the first quarter.
Speaker Change: We expect first quarter 'twenty 'twenty four revenue of 73 million to $74 million.
Speaker Change: Reflecting growth of 1% to 3% compared to the first quarter of 2023.
Speaker Change: With that I will pass the call back to Kevin for closing remarks.
Speaker Change: The start of 'twenty 'twenty four opens a new chapter for energen.
Michael Stephen Matson: I remain optimistic about the future, and I'm excited to welcome the new additions to our management team. Our products are trusted and reliable, our innovation pipeline is robust, and we have a particularly exciting opportunity to increase our ability to impact patients' lives with the recent addition of PhysioAssist to our portfolio. Whether there's much work to be done or not, our team is equipped to handle the challenge. Before turning it over for questions, I would like to take a moment and thank Mike for taking on the interim CFO role for the past. His presence has been an immense benefit to myself and the company. With that said, I will open it up for questions. Operator. And ladies and gentlemen, at this time, we'll conduct our ques- If you would like to ask a question, please press star 1, confirmation. You may press star 2 if you would like to remove your... One moment, please.
Michael Stephen Matson: We remain optimistic for the future and I'm excited to welcome the new additions to our management team.
Michael Stephen Matson: Our products are trusted and reliable our innovation pipeline is robust and we have a particularly exciting opportunity to increase our ability to impact patients' lives with the recent addition of physio assessed to our portfolio.
Michael Stephen Matson: There's much work to be done and team is equipped to handle the challenges ahead.
Speaker Change: Before turning it over for questions I would like to take a moment and thank Mike for stepping in the interim CFO for the past six months. His presence has been an immense benefits to myself and the company joining this time.
Speaker Change: With that I will open it up for questions operator.
Speaker Change: Operator.
Operator: Thank you.
Operator: Ladies and gentlemen at this time, we will conduct a question and answer session.
Operator: If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue you.
Operator: You May press Star two if you would like to remove your question from the queue for.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Michael Stephen Matson: Our first question... Robby Marcus with J-P-S-I-N-T-I-N-T-I-N-T-I-N-T-I-N-T-I-N-T-I-N-T-I-N-T-I-N-T-I-N-T-I-N-T-I-N-T-I-N-T-I-N-T-I- Just, you know, my first question: I think when we look at your performance in the corner, your quarter, DTC, kind of stands out to us again, you know, pretty significant sequential step down. And then when we think about guidance, it seems as though you're expecting that to stay relatively weak. So what are your plans for really stabilizing the business? And what gives you confidence that you can execute on that over the coming quarters? Sure, this is Kevin. When we look at our opportunities here over the coming quarters to stabilize and grow the business, we have three areas we're really focused on. One way is to reduce friction.
Operator: Our first question comes from Robbie Marcus with Jpmorgan. Please state your question.
Operator: Hi, This is Allen on for Robbie just my first question I think when we look at your performance in the corner near quarter DTC kind of stand that stood out to us again pretty significant sequential step down and then when we think about the guidance. It seems as though you're expecting that to stay relatively weak. So what have you.
Operator: Plants are really stabilizing that business and what gives you confidence they can execute on that over the coming quarters.
Operator: Yes.
Speaker Change: Yes sure yes sure. This is.
Speaker Change: Kevin.
Michael Stephen Matson: When we look at our opportunities here over the over the coming quarters to stabilize and grow the business. We look at three areas. We're really focused on X one is reducing the friction that's.
Michael Stephen Matson: That's within the sales channels. We see opportunities there to continue to improve the opportunities that allow us to grow the business. We also see some near-term opportunities within our B2B channel. Reducing COGS and controlling spends is another key focus for us going forward to improve our pathway to profitability, and also approval of PhysioAssist, an expansion of our digital health portfolio. But I've seen more positives than negatives.
Michael Stephen Matson: Within the sales channels, we see opportunities there to continue to improve that or opportunities that allow us to grow the business. We also see some near term opportunities within our BDA E channel.
Michael Stephen Matson: Reducing cogs and controlling spend it's not a key focus for us going forward to improve our pathway to profitability.
Michael Stephen Matson: And also approval or the physio assessed and expansion of our digital health portfolio, but I've seen more positives and negatives we have a good team in place and existing product that is top of the line, but we do see a lot of room for improvement within our sales strategy, we have a new chief commercial officer, who we just appointed started started last.
Michael Stephen Matson: We have a good team in place, an existing product that is top of the line, but we do see a lot of room for improvement within our sales strategy. We have a new chief commercial officer who we just appointed and started last month. We're working on it, but we want to ensure that we have, that we're maximizing the number of patients that we can reach each month. And there are a number of aspects of the business where we're not prioritizing certain types of sales because of our incentive structure, and we want to fix that. That incorporates both the DTC business; it looks at the rental business as a whole, as well as our cash sales. Got it.
Michael Stephen Matson: Months, we're working on it but we want to ensure that we have that we're maximizing the number of patients that we can reach in each months and this number of aspects of the business.
Michael Stephen Matson: Excuse me, we're not prioritizing certain types of sales because of our incentive structure and we wanted to fix that that incorporates both the DTC business. It looks at the rental business as a whole as well as our cash sale.
Mike Matson: And then just thinking about your capital position, you just mentioned how kind of reining in cost is a key part of the strategy, but you ended the quarter with a little over $128 million. How should we think about cash burn, whether or not you're confident that you can kind of steady the ship before you might need to raise more capital? Thank you.
Speaker Change: Got it and then just thinking about your capital position you just mentioned how kind of reining in costs is a key part of the strategy, but you ended the quarter at a little over 2120 $8 million, how should we think about cash burn whether or not youre confident that you can kind of steady the ship before.
Speaker Change: You might need to raise more capital. Thank you.
Mike Matson: Yeah, sure. So, you know, at the end of the year, we had over $125 million in cash and equivalents with no debt outstanding. We focused our investments on innovation within our pipeline, sales organization, and manufacturing capabilities. We're going to continue to monitor and manage our expenses and our cash burn. But we do believe that we have a strong balance sheet and capital position to fund our upcoming initiatives, and we don't anticipate going out for a raise. Did I miss anything to add there, Mike?
Speaker Change: Yes sure so.
Speaker Change: At the end of the year, we had over a $125 million in cash and equivalents with no debt outstanding.
Focused our investments on innovation within our pipeline sales organization and manufacturing capabilities, we're going to continue to monitor and manage our expense and our cash burn, but we do believe that we have a strong balance sheet and capital position to fund our upcoming initiatives. So we don't anticipate going out for a risk.
Speaker Change: Anything to add there Mike did I Miss no I think you covered it well.
Operator: No, I think you covered it well. And our next question comes from Margaret Andrew with William Blair. Hey, good afternoon, guys.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Margaret Andrew with William Blair. Please state your question.
Margaret Kaczor: Hey, good afternoon, guys. Thanks for taking the questions.
Michael Stephen Matson: Thanks for taking the question. I maybe wanted to go back to your commentary on some recent volatility in the market associated with the competitor leaving. I guess what does that mean?
Margaret Kaczor: I just wanted to go back to your commentary.
Margaret Kaczor: Our Chilean market associated with the competitor, leaving I guess, what does that mean is that related to pricing is that related to demand or are there things kind of intra quarter and.
Michael Stephen Matson: Is that related to pricing? Is that related to demand? Were there things kind of intra-quarter?
Michael Stephen Matson: And, you know, I guess I'm curious if you can also give us an estimate of what their market share was in the last. Yeah, so yeah, thank you, Margaret. And, you know, with the exits from the market, both in the SOC and the POC business, as I mentioned, we do see that there's a shift in dynamics there. We are closely monitoring that. We believe that there are going to be opportunities for us, and we're putting ourselves in positions to be able to take advantage of them as they present themselves. But it's not a light switch.
Speaker Change: Yeah, I guess I'm curious if you can also give us an estimate of what their market share wise in the last year.
Speaker Change: Yeah.
Speaker Change: Yeah. So yeah, thank you Margaret and.
Speaker Change: With the with the exits from from the market both on the <unk> and the POC business as I mentioned, we do see that there is a shift in dynamics there where we are closely monitoring that we believed that there was going to be opportunities for us and we're putting ourselves in position to be able to why to take.
Speaker Change: <unk> as they present themselves.
Speaker Change: But it's not a it's not a light switch. This isn't this isn't a windfall. This is something that is going to present itself over time, we're focused on those opportunities if we see them coming.
Michael Stephen Matson: This isn't a windfall. This is something that is going to present itself over time. We're focused on those opportunities; we see them coming, really opportunities within our various business channels there. But we would anticipate more near-term opportunities within the B2B channel. But it's less on an ASP aspect, as well as your market availability demand for POCs where there's a where there may be a potential void. But that is what I can't really comment on their market share versus our market share; we believe that we have a leadership position in the markets. And that is also giving us an advantage to be able to step in and help and fill that void. Okay, and I'll maybe tie these two questions together, but can you at least say if they were maybe the number two player in the marketplace? I'm just trying to get a sense of, you know, just roughly how big they might have been.
Speaker Change: Really opportunities within our various business channels, there, but we would anticipate more near term opportunities within the <unk> channel, but it's less on a on an ESP aspect as well as market availability demand for POC as where those where there may be a potential void, but.
Speaker Change: That is yes.
Speaker Change: I can't really comment on their market share versus our market share. We believe that we have a leadership position in the market and.
Speaker Change: And that is also giving us an advantage to be able to step in and helped by and how it filled that void.
Speaker Change: Okay.
Speaker Change: And Oh, maybe tie these two questions together.
Speaker Change: Can you at least say if they were maybe the number two player in the marketplace I'm, just trying to get out and get a sense of just roughly how big they might have been.
Michael Stephen Matson: And then, you know, I guess the real question is around first quarter sales guidance, maybe a little bit lower than we were expecting. And other than 2023, I'm not sure that I've ever seen a down sequential Q1 for Inogen in my time covering the company. So is that related to a certain business segment? Or can you give us a better breakdown by business segment?
Speaker Change: And then yeah I guess the real question is around first quarter sales guidance, maybe a little bit lower than we were expecting.
Speaker Change: And other than 2023, I'm not sure that I've ever seen a down sequential Q1 tranche Ed.
Speaker Change: In my time, covering the company. So is that related to a certain business segment or can you give us a better breakdown by business segment.
Michael Stephen Matson: Yeah, so in regards to market share and position, there's certainly been some shifts in that, and I don't believe I'm in the right position to be able to comment on exactly who's number two in the market here right now. If we get more clarity down the road and I have more comfort being able to address, certainly I will. And on a quarter-on-quarter basis, we see opportunities, as I mentioned there, ahead of us. And as we look at giving further guidance as we go out, I think we'll be able to give you some additional clarity. But it is not necessarily tied to any one of the segments.
Speaker Change: Thanks.
Speaker Change: Yes.
Ed: Yeah with regards to the to the market share in the position. It's there's been certainly some shifts in that and so and I don't believe it's.
Ed: In the right position to be able to comment on exactly who is number two in the market here right now if we get more clarity down the road and I have more comfort being able to address yes, certainly I certainly I will answer.
Ed: And on the quarter on quarter, we see opportunities as I as I mentioned, there ahead of us and as we look at giving further guidance as we go out I think we'll be able to give you. Some some additional clarity, but it's not necessarily tied to any one of the any one of the segments. We do also see upside within this that we're working with <unk>.
Michael Stephen Matson: We do also see upside within this that we're working to position ourselves to be able to accelerate the growth as we go forward. Okay, so I'm sorry. In the first quarter, you would just assume that every business segment is down sequentially, even with the way that you guys had presented the guidance on a total company basis. Is that correct?
Ed: And ourselves to be able to wire to be able to accelerate the growth as high as we go forward.
Speaker Change: Oh I'm sorry in the first quarter you would just assume every with every business segment is down sequentially, even with the way that you guys had presented that they've got it on a total.
Speaker Change: Total company basis.
Speaker Change: That correct.
Michael Stephen Matson: So the sequentially, do you mean Q4 versus Q1? Correct. I think if you look at Q4, we had growth in our international market, international B2B. We were down in our domestic B2B, and I think that would be the way I would think about the trends, I think, going forward for the near term. Okay, thanks guys. Thank you, and as a reminder to ask a question, press star 1. Our next question... Mike Matson.
Speaker Change: So the sequentially. So do you mean from Q.
Speaker Change: Q4 versus Q1.
Speaker Change: Correct.
Speaker Change: No.
Speaker Change: If you look at Q4, we had growth in our international market International BV.
Speaker Change: We're down in our domestic <unk>.
Speaker Change: And I think you know that.
Speaker Change: That would be the way I would think about the trends I think going forward for the near term.
Speaker Change: Yeah.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Second a reminder to ask a question press star one.
Speaker Change: Our next question comes from Mike Matson with Needham <unk> Company. Please state your question.
Mike Matson: Yeah, thanks for taking my questions. I guess I know, Kevin, you've only been there for a few months, but, you know, the prior management team had kind of a strategy where they were, to some degree, de-emphasizing the BTC channel and focusing more on kind of the rental side of things. And they weren't giving up on BTC, but they were, you know, scaling back the sales force somewhat and trying to, you know, just drive more productivity through the, you know, smaller number of reps. But, you know, is that, you know, consistent with the way you're going to kind of run the business? And, you know, there are kind of four channels here. They all have kind of different margin structures and different...
Mike Matson: Yes, thanks for taking my questions.
Mike Matson: So I guess I know, Kevin you've only been there for a few bonds but.
Mike Matson: The prior management team had kind of had the strategy where do they were.
Mike Matson: To some degree deemphasizing the BTC.
Mike Matson: Channel and focusing more on kind of the rental side of things.
Mike Matson: Up on DTC, but they were scaling back the sales force somewhat try that.
Mike Matson: Top drive more productivity through that through the.
Mike Matson: Smaller number of reps, but.
Speaker Change: So is that <unk>.
Speaker Change: System, the way Youre going to kind of run the business.
Speaker Change: There's kind of four channels here, they all have kind of different margin structures and different.
Michael Stephen Matson: I guess, you know, call them points. So, you know, maybe you could just tell us where you plan to focus your investment between those four, if you know, at this point. Yeah, thank you for the question there. And Mike, when we look at the different channels, we're looking at synergies that we have within them. And when I mentioned some of the friction that we've seen before, we have patients that are reaching out to us that want to have an Inogen POC. We have referrals that are coming in from prescriber channels. Same thing, patients that want to have an Inogen POC.
Speaker Change: I guess.
Speaker Change: Call point so.
Speaker Change: Maybe you could just tell us where you plan to focus our investment.
Speaker Change: Between those four if you know at this point.
Speaker Change: Yes.
Speaker Change: Yeah. Thank you for the question there and.
Speaker Change: Yes, Mike when we look at the different channels.
Speaker Change: We're looking at synergies that we have within them and when I mentioned some of the friction that we've seen before this is yeah.
Speaker Change: We have patients are that are reaching out to us that want to have an engine POC. We have referrals are coming in from the prescriber channels same thing patients that want to have having energen POC and there is crossover in there between patients that have insurance coverage appropriate coverage with a number of months.
Michael Stephen Matson: And there's crossover in there between patients that have insurance coverage, appropriate coverage with the number of months left that they want a POC versus those that want or need to, for certain dynamics, have a cash sale. And we're in the process of having these distinct channels. There's friction where we're handing patients off from one channel to the next channel, and we see opportunities to be able to minimize that friction, to be able to maximize the number of patients on an Inogen POC, regardless of what that patient's preference is, insurance status, and so forth. If it's a cash sale, we get them a cash sale with minimum touches. If it's insurance coverage, we get them an Inogen POC with minimum touches. So it's perhaps not directly answering the question there, but we do see opportunities within the rental space, as well as DVC cash sales. But there is a lot of crossover between those.
Speaker Change: Alaska, one of POC versus those that want or need to for certain dynamics have a cash sale and we're in the process of having these distinct channels stairs friction where were handing patients off from one channel to the next channel and so we see opportunities to be able.
Speaker Change: To minimize that friction to be able to maximize the number of patients on an imaging POC, regardless of what that patients preferences insurance status and so forth. If it's a cash sale, we get them a casio with minimum touches effects of insurance coverage get them an engine POC with with minimum touches so it's a it <unk>.
Speaker Change: <unk> not directly answering the question there, but we do see opportunities within the rental space as well as the as well as the PVC cash sales, but there is a there is a lot of crossover between those so it's hard to as we're approaching this with our new Chief commercial officer, and looking at the best way to maximize that.
Michael Stephen Matson: So it's hard to, as we're approaching this with our new chief commercial officer, looking at the best way to maximize that and accelerate it, it's hard to start to keep them in very specific and pure silos. So that, for us, is creating opportunity for us. Okay, yeah, that's fair.
Speaker Change: And accelerated its hard to start.
Speaker Change: To keep them and very specific and pure silos. So that's that for us is creating opportunity for growth.
Speaker Change: Okay, Yeah, that's fair.
Michael Stephen Matson: And then you commented on this partnership that you were going to, I guess, end. I think you were referring to the prior management team having set up this physician prescriber sales force. I think it was around 60 reps, but I think maybe some of those reps were employed by a third party or something.
Speaker Change: And then just you commented on this partnership that you were going to I guess and I think you were referring to the.
Speaker Change: The prior management team had set up this position for a prescriber.
Speaker Change: Prescriber Salesforce I think it was around 60 reps, but I think maybe some of those reps were employed by a third party or something I don't remember the name of the company off the top of my head, but is that what you were referring to and I guess, what happens to that Salesforce does it just transition over to.
Michael Stephen Matson: I don't remember the name of the company off the top of my head, but is that what you were referring to? And I guess what happens to that sales force? Does it just transition over to Inogen and become, you know, Inogen employees? Or, you know, that number 60, does that go up? Does that go down?
Speaker Change: Two engine and become an engine employees or.
Speaker Change: That number 60 does that go up does that go down.
Michael Stephen Matson: Yes, so it's a fair question there, and a couple of answers to that are yes, there is a third party within that prescriber channel that we went away from. We're bringing the sales reps in-house, and we're restructuring how that looks a little bit for us to be able to have more control, tactical control, and strategic control over that sales channel going forward. We are right-sizing that. I'm not going to comment right now on the number specifically in each of the sales channels, but it's important for us, one, to become profitable and to control those expenses. This was an opportunity for us also to control some OPEX, take some of that out by bringing that sales channel in-house. Again, it's important for us to have the right synergy within these channels going forward to be operating Okay, thanks. And then just one last one on physiosis. So, you know, just can you comment on, I guess I never really got a straight answer from the prior management team about the timing of when or, I guess even, the regulatory pathway that the thing's gonna have to go through. So, is it a 510k?
Speaker Change: Yeah. So it's what I said is fair question, there and a couple of answers to that is yes. There is a there was a third party within that within that prescriber channel that we went away from.
Speaker Change: We're bringing those sales reps in house, where our restructuring how that how that looks a little bit for us to be able to have more control tactical control and strategic control over that sales channel going forward. We are right sizing that I'm not going to comment right now on the numbers specifically in each of the sales channel.
Speaker Change: But it's important for us one to become profitable and to control. Those expenses. This was an opportunity for US also to control. Some opex take some of that out by bringing those by bringing that sales channel in house and again, it's important for us to to have the right synergy within these channels going forward the operating as one energen and so.
Speaker Change: Bringing them in house enables us to want to move forward with that plan as well.
Speaker Change: Okay. Thanks, and then just one last one on <unk>. So.
Speaker Change: Just can you comment on.
Speaker Change: I guess I've never really got a straight answer from the prior management team about the timing of when or I guess, even the regulatory pathway that the things that I have to go out there. So is it a five 10-K and whats the expected timing.
Michael Stephen Matson: And, you know, what's the expected timing of when you can, you know, get this thing cleared and launch it in the US? Yes, and when we look at the semiox and physiosis coming in, what I will say is we're very happy with the progress that we've made. We've engaged with the FDA, we're working through that process, and I'm not trying to avoid it, but I do want to be careful about giving any expectations about regulatory approval until we have that firmly underway and we know we have clarity as to when that's going to happen. So at the appropriate time, I'll come back, and I'll give you some more information on. Okay, now that's fine.
Speaker Change: When you can get this thing cleared and launched it in the U S.
Speaker Change: Yes.
Speaker Change: When we look at the semi accident Physio says coming in what I will say is we're very happy with the progress that we've made and we've engaged with the FDA, we are working through that through that process.
Speaker Change: And I'm not trying to avoid it but I do want to be careful on giving any any expectations about the regulatory approval until we have that firmly underway. We know we have clarity as to when that's going to happen. So at the appropriate time, we'll come back and ill.
Speaker Change: I'll give you some more information on that.
Speaker Change: Okay, No that's fine, but I guess, one follow up on Brazil. So you called that out in the early part of your remarks prepared remarks about kind of meeting that to or relying on that to drive growth. So.
Michael Stephen Matson: But I guess one follow-up on this is, so you called that out, you know, in the early part of your remarks, prepared remarks about kind of needing that or relying on that to drive growth. So maybe I'm misinterpreting what you said there, but what does that imply for the POC part of the business? I mean, do you think you can get POCs back to growth without relying on, you know, physiosis or other, you know, new categories like that? Simple answer: yes, we can. We can get POCs back to growth without relying on PhysioAssist.
Speaker Change: Maybe I'm misinterpreting, what you said there but.
Speaker Change: What does that imply for the POC part of the business. I mean do you think you can get POC is back to growth without without relying on physio sister other new categories like that.
Speaker Change: Simple answer yes, yes, we can we can get POC is back to growth without relying on physio assessed physio assessed.
Michael Stephen Matson: PhysioAssist, layering that into it, there's synergies within that with that device as well. There's an overlap with the patients that will benefit from a PhysioAssist device, a Semioc device, as well as a POC that will help us develop even deeper relationships, especially with clinicians, as well as the B2B channel that we see down the road. But we do see a pathway for us to grow the POC business independent of Semioc. Okay, great.
Speaker Change: Layering that into it there is synergies within that with that device as well theres overlay with the patients that will benefit from our physio assist device semiotics device as.
Speaker Change: As well as a POC that will help us develop even deeper relationships, especially with commissions as well as the <unk> channel, we see down the road, but we do see a pathway for us to grow the POC business independent of semantics.
Michael Stephen Matson: Thank you, and our next question comes from Mathew Blackman with... Hi, this is Colin on for Matt. I had a quick one regarding the U.S. and how durable you expect the HME Expense Manager to be. You talked about revenues being down in the fourth quarter and possibly expected to go down in the fourth quarter. What are your thoughts on that? First quarter, how durable should we expect this environment to be?
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you and our next question comes from Mathew Blackman with Stifel. Please state your question.
Speaker Change: Hi, This is Colin on for Matt I had a quick one regarding U S b to B business.
Colin: How durable you expect.
Colin: <unk> expense management to be from here you talked about.
Colin: Revenues being down in the fourth quarter, and possibly expecting that to continue in the first quarter, how durable should we expect this environment to be.
Michael Stephen Matson: We see good upside within the B2B channel. We've been working on relationships there, building synergies with B2B, having direct conversations across the globe with our top B2B partners to find out what are the best ways for us to work together to be partners and also reduce the friction between the channels or direct channels as well as B2B. So we see opportunities there for us to continue to build and grow that partnership. And just one follow-up on the market, competitor, just wanted to confirm: is that in any way factored into the first decision? No, it's not. Thank you. And, ladies and gentlemen, that's all the questions we have for today. And with that, we conclude today's conference. All parties are now
Speaker Change: We see.
Speaker Change: Good upside within the B to B channel, we've been working on relationships, they're building synergies with the <unk> to be having direct conversations across the across the globe with our top <unk> partners to find out what are the best ways for us to work together to be partners and also reduce the friction between.
Speaker Change: <unk> the channels, our direct channels as well as the B to B. So we see we see opportunities there for us to continue to build and grow that business.
Speaker Change: And just one follow up on.
Speaker Change: The market exit from your competitor just wanted to confirm is that in any way factored into the first quarter guidance.
Speaker Change: No it's not.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you and ladies and gentlemen, that's all the questions. We have for today and with that we conclude today's conference. All parties may now disconnect have a great evening.