Q1 2025 Inogen Inc Earnings Call
Welcome to Inogen's first quarter, 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following a management's prepared remarks, we will hold the Q&A session.
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As a reminder, this conference is being recorded today, May 7, 2025.
Ryan Peterson: I would now like to turn the call over to Ryan Peterson and the best of relations
Speaker Change: Thank you all for participating in today's call. Joining me are President and CEO Kevin Smith and CEO Mike Bourque. Earlier today, Inogen released financial results for the first quarter 2025.
Speaker Change: The earnings release is available in the Investor Relations section of the company's website along with a supplemental financial package.
Speaker Change: As a reminder, the information presented today will include forward-looking statements, including without limitations.
Speaker Change: statements about our growth prospects and strategy for 2025 and beyond.
Speaker Change: Expectations related to our financial results for the second quarter and full year 2025.
Speaker Change: Progress of our strategic initiatives, including innovation, our expectations regarding the market for our products and our business and supply and demand for our products in both the short term and long term.
Speaker Change: The forward-looking statements in this call are based on information currently available to us as of today's date, May 7, 2025. These forward-looking statements are only predictions and involve risks and uncertainties that are set forth in more detail in our most recent periodic reports filed with the Securities and Exchange Commission.
Speaker Change: Actual results may vary and we disclaim any obligations to update these forward-looking statements except as may be required by law. During the call, we will also present certain financial information on a non-GAAP basis.
Speaker Change: 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.
Speaker Change: and other expenses that are not indicative of Inogen's core operating results.
Speaker Change: Management uses non-GAAP measures internally to understand, manage and evaluate our business and make operating decisions.
Speaker Change: Reconciliation between US Gap and non-GAAP results are presented in tables within our earnings release.
Speaker Change: With that, I will turn the call over to Inogen's president and CEO , Kevin Smith.
Kevin Smith: Good afternoon, and thank you for joining our first quarter 2025 conference call.
Kevin Smith: During today's call, I will review our first quarter performance and provide an update on our progress towards our three strategic priorities.
Kevin Smith: Driving top line growth, advancing our path to profitability and expanding our innovation pipeline.
Kevin Smith: I would then turn the line to Mike for a full review of our financials and outlook.
Speaker Change: Before I share more on our first quarter results, I would like to briefly address the recently announced terrorists.
Speaker Change: Considering our business position in current exemptions, we do not anticipate a material impact to our operating plan or financial profile from the announced terrace.
Speaker Change: We believe that we are well positioned to continue executing on our strategic priorities and financial goals despite these developments.
Speaker Change: However, the situation is dynamic and we will continue to monitor it closely.
Thank you.
Speaker Change: Shifting back to our strong first quarter results were we delivered over $82 million in revenue reflecting 5.5% year-over-year growth. Alongside the strong top-line performance, we drove another quarter of adjusted even a profitability, reflecting our focus on operational excellence.
Speaker Change: Our growth was driven by the continued strength of our business to business channels.
Speaker Change: This was offset by expected pressure in our DTC channel, where we have optimized the size of our sales team.
Speaker Change: We expect more favorable year-over-year comparisons in the back half of 2025, as we lap one year with our newer, more efficiently sized team in place.
as previously announced. [inaudible]
Speaker Change: We finalize our collaboration with UL Medical during the quarter. This collaboration furthers our efforts.
Speaker Change: toward all of our strategic priorities by driving growth, broadening our geographic reach and improving our product portfolio.
Speaker Change: As a reminder, you well would distribute Inogen Portable Oxygen Concentrators under the Inogen Brand in China, accelerating our entry into the Attractive Chinese Respiratory Market.
Speaker Change: We will be distributing their stationary oxygen concentrators under the Inogen brand in the United States, expanding our offerings across all of our channels.
Speaker Change: Our team is making progress on completing the necessary regulatory hurdles for a full rollout of these products in both the United States and China.
Speaker Change: In the United States, we expect a limited launch in 2025 as we focus on market development with a more fulsome launch in 2026. While in China, we continue to work through the registration process with you all.
Speaker Change: We will continue to provide updates on these processes as appropriate.
Speaker Change: Additionally, you will complete an investment through one of its subsidiaries of approximately $27 million in late February , acquiring a 9.9% ownership stake in energy.
Speaker Change: This investment is reflected in our first quarter financials and is meaningful capital for reinvestments into growth and innovation.
Speaker Change: Now turning to our second strategic objective, progressing towards sustained profitability, where we have continued to make considerable advancements.
Speaker Change: In the first quarter, we once again generated positive adjusted EBITDA as a result of our continued top line strength and focus on managing expenses responsibly.
Speaker Change: As Mike will expand upon further in his remarks, we still expect to approach adjusted even for the full year 2025 as we continue to invest in innovation, the introduction of Symiacs in our UL Rollout.
Speaker Change: We have made significant progress where we will carefully manage our expense profile and drive manufacturing and operational efficiencies coming forward.
Speaker Change: Finally, I would like to provide an update on our innovation pipeline.
Speaker Change: We are continuing to make progress with our pursuit of reimbursement and the limited commercial
Speaker Change: There are no material updates to provide as of now, but we will continue to show pertinent information in the future.
Speaker Change: In our digital health portfolio, we are advancing several updates to streamline remote monitoring the device usage and status for patients and our partners.
Speaker Change: We remain committed to developing digital solutions that save time and money. I look forward to sharing updates on those as they are introduced about the year.
Speaker Change: I am proud of our team's strong performance in the first quarter and look forward to delivering progress on growth, profitability, and innovation throughout the rest of 2025.
Speaker Change: With that, I'll turn it to Mike to provide an update on her financials. Mike?
Thank you, Kevin. I'm good afternoon, everyone.
Speaker Change: Unless otherwise noted, all financial comparisons of to the prior year to parable period.
Speaker Change: Total revenue for the first quarter of 2025 was $82.3 million into all of us.
Speaker Change: An increase of 5.5% on a reported basis, and 7.1% on a constant currency basis compared to the prior year.
Speaker Change: The increase was primarily driven by higher demand from international and domestic business business customers.
Parsley Offset by Loha Direct, Consumer and Mental Revenue
Speaker Change: As a reminder, full constant currency growth rates across our channels can be found in our earnings police.
Speaker Change: For the first quarter, foreign exchange had a negative 160 basis points impact on total revenue and a negative 500 basis points impact on international revenue.
Thank you very much.
Speaker Change: Looking at first quarter revenue on a more detailed basis, domestic business to business revenue increased 29.9% to 21.5 million dollars, versus 16.5 million dollars in the prior period, driven by increased demand from existing customers.
Speaker Change: International Business to Business Revenue increased 22.9% to $32 million compared to $26 million in the prior period, primarily driven by an increase in demand from no inexisting customers.
Michael Matson.
Speaker Change: As we have discussed in the past, we have made significant changes to our business and operational profile within the DTC channel over the past 1 to 2 years in order to improve efficiency in this channel as part of our commitment to driving increased profitability.
Speaker Change: These changes also allowed us to adapt to the evolving market dynamics.
Speaker Change: We believe our current team is well positioned for better performance as we look to the back half of this year and beyond.
Speaker Change: Rental revenue decreased 7.5% to 13.8 million dollars from 14.9 million dollars in the prior period, primarily driven by continued lower average billing rates due to the mixed shift to private payers.
Speaker Change: which we see as a positive indicator for health of this channel.
Now I want to discuss first quarter gross margins.
Speaker Change: Total gross margin was 44.2% in the first quarter of 2025, increasing 15 basis points from the same period in the prior year, primarily driven by lower warranty expense offset by the impact of customer mix and channel mix.
Speaker Change: Sales revenue, Gross Margin was 44.4% an increase of 24 basis points.
Speaker Change: Rental Revenue Gross Margin was 43.3% a decline of 33 basis points.
Moving on to Operating Expense
Speaker Change: In the first quarter of 2025, total operating expense decreased to $44 million compared to $15.6 million in the prior period
Speaker Change: representing a decrease of 13.1% as we continue to execute on our goal to improve operating margins.
Speaker Change: As a reminder, our OPEX and Q1 of 2024 included higher than usual costs, such as consulting fees, including the exit of our third-party prescriber channel relationship.
and the rest of the team. Thank you. Thank you.
Speaker Change: In the first quarter of 2025, we reported a gap net loss of $6.2 million $2.2 million.
Speaker Change: compared to a loss of $14.6 million in the prior period.
Speaker Change: and lost per diluted share of 25 cents in the first quarter of 2025, per se a loss of 62 cents in the prior period.
Speaker Change: On an adjusted basis, we had a net loss of $2.9 million in the first quarter of 2025, compared to a loss of $10.4 million in the prior period, and an adjusted loss per diluted share of $0.11 in the first quarter of 2025.
Speaker Change: Compared to a loss of 45 cents in the prior period.
. . . .
Speaker Change: Just that EBITDA was a positive $36,000 in the first quarter of 2025, compared to a negative $7.6 million in the prior period.
Speaker Change: Moving on to our balance sheet as of March 31, 2025, with cash, cash equivalents, and of $122.5 million with no debt of standing.
Speaker Change: As a reminder, we made a $13 million earnout payment to physio assist in the first court of 2025 related to achieving FDA clearance for Simeon OX.
Speaker Change: On that note, I will now discuss our full year 2025 and second quarter financial outlook.
Speaker Change: We continue to expect full-year 2025 reported revenue to be in the range of $352 million to the turn at $55 million, reflecting a 5-6% reported growth relative to the full year of 2024.
Speaker Change: As previously announced, our gross margin expectations for the full year have not changed
Speaker Change: Before year 2025, we expect to approach adjusted EBITDA break even.
Speaker Change: The second quarter, 2025, we expect reported revenue to be in the range of $89 million to $91 million, reflecting flat to approximately 3% growth relative to the second quarter of 2024.
Speaker Change: Our second quarter outlook reflects a healthy sequential step up in total revenue from the first quarter. This follows our expectations for quarterly revenue distribution as we track toward our full year revenue expectations.
Speaker Change: As Kevin said earlier, in his remarks, based on current exemptions from certain medical devices, we do not currently anticipate any significant tariff-related headwinds to gross margin or adjusted EBITDA. However, we will continue to monitor the involvement situation and provide updates as relevant.
Kevin Smith: And with that, I will cast a call back to Kevin for closing remarks
Kevin Smith: Thank you, Mike. I am proud of our achievements in the first quarter. They are a direct reflection of the dedication and resilience demonstrated by our team.
Kevin Smith: We've driven notable growth while staying focused on operational efficiency and innovation. I'm confident that we'll maintain this momentum throughout the year and look forward to continuing to meet the needs of respiratory patients globally.
With that, I will open it up for questions. Operator
Kevin Smith: Thank you. We'll now be conducting a question and answer session.
Speaker Change: If you'd like to ask a question today, please press star 1 from your telephone keypad and in confirmation tone will indicate your lines in the question queue.
Kevin Smith: You may press star two if you'd like to withdraw your question from the queue [inaudible]
Kevin Smith: For Participants Using Speaker Equipment, it may be necessary to pick up your handset before pressing the star keys. One will be pleased when we pull for questions. Thank you.
Speaker Change: Thank you, and our first question is from the line of Matthew Blackman with Stephal. Please receive your questions.
Kevin Smith: Hey guys, this is Colin Clark on from Matt. I had a quick one on rent tools. You spoke to billing rates being down, but looking at my model, net patients have been declining for a few straight quarters now. Can you speak to which driving that?
We can't take that question, Smock [inaudible]
Kevin Smith: Well, we've been discussing in the past in terms of the rental as a couple of things that have been challenging. One of the first one is really, as we look at.
Michael Bourque: A total patient service and what percentage of those patients are under Medicare versus private pay, with private pay being a low monthly reimbursement rate. What we have been saying for number of quarters was that...
Michael Bourque: that percentage of private pay was getting higher and higher as a percentage of total piece of service.
Speaker Change: So therefore we're seeing we're seeing impact to not only the growth not only to the revenue line but gross margin because our service cost weren't you know they don't go down they they stay the same. That was one of the dynamics we've been talking about the other one we've been talking about was.
Speaker Change: Capitation, so Paces at the Capitated Period. That was increasing as well. Again, that was causing an impact to both Revenue and Rosemargin now. What we are seeing now in that channel.
is both of those things leveling up a little bit.
Speaker Change: Great. And I'm curious about the rentals gross margin out performance, at least versus our estimate and consensus. Was there anything particular behind that? I think we had thought about the billing changes having a little bit more of an impact. Is this tracking as you guys expected?
Speaker Change: I think it's another positive sign, sure. We've had it in the past, we've had some challenges in that area with certain operating costs, cost of control associated with that. We've been doing a number of things to try to improve on those, so we're seeing some of the benefit of that.
Speaker Change: All right, thank you guys for taking my questions. I'll hop back in cute you.
as well. Thank you. Thank you. Thank you. Thank you.
Speaker Change: Our next questions come from the line of Robbie Marcus with J.P. Morgan. Please to see your questions. Hi, this is actually Rohin on for Robby. Thanks for taking our question.
Speaker Change: Some of the specific actions you're taking to stabilize it, to stabilize the DTC sales and rental revenues, maybe just more color on that, and I think about that moving forward.
Speaker Change: I think the best way to explain this, this might be the best way to explain it. So, we look at our, we look at the year. First of all, we're pleased with that key one of the results. We look at, we look at the first half of 2025.
Speaker Change: We are what we expected to be more confident with our full year guidance. We reaffirmed that guidance.
Speaker Change: Secondly, we need to keep in mind that last year we had tough year-old via comms and DTC.
That was the case in all four quarters [inaudible]
Speaker Change: of the year, so the DTC channel was negatively impacted, impacting our Eurovia total company revenue growth.
Speaker Change: for both the first and second half of the year. Now, and we look at
Speaker Change: That, in 2025, that's going to only occur on the first half of the year because of that rebasing of that DTC channel we've been talking about. So, again, we've rebased that in 2024, which means our rep count was down significantly. So, as we look at both roughly halfway through 2025, we'll start seeing those cons more in line.
Speaker Change: Probably more likely in but halfway through tube three. So we'll no longer have that DTC unfavorable comparability on a year over your basis impacting a total company growth rate. And as a result, our expectations to see second half growth rates better than the first half growth rates.
Hopefully the answer to your first question.
Speaker Change: Yeah, that was helpful. And I guess just to follow up on tariffs, I appreciate the color that you provided on the exemptions. And I assume that that only really applies to products.
Speaker Change: Manufactured or coming to the U.S., I should say. So how are you thinking about the U.L. partnership beyond China and maybe like have you also gotten exemptions for that just with regards to the reciprocal tariffs? Thanks for the questions.
Speaker Change: Yeah, yeah, thanks. I'll go ahead and I'll take that and you know, Rohin, we're still
Speaker Change: You know, as we stated there, you know, the tariffs are with the exemptions. We are not impacted. I'm bringing a bringing product into the United States. I'll also just clarify too. And we think about Europe and it's not necessarily asked.
Speaker Change: without having to have components passed through the United States to make their way too on to check, so that gives us coverage in the check and also opportunity there in international markets. Thank you very much.
Speaker Change: potentially including China as well. But China, we are still a little away from having the product there on the market launched in China. So that gives us that gives us a little bit of time. But right now
Speaker Change: We have options to be able to get product in China both from the United States as well as from Europe , so we avoid we have some mitigation.
Thanks.
Speaker Change: Our next questions are from the line of Mike Matson with Needham and Company. Let's just use your questions.
Speaker Change: Yeah, thanks. So, you know, great to see that the really strong growth continuing in B2B, both US and OUS.
Speaker Change: You know, I'm just wondering, I don't know if you have any way to measure this or not, but you know, is that how much of that is?
Speaker Change: Share games, how much of that is just kind of the overall category growth for PSC's, you know any thoughts on that?
Speaker Change: Michael, I'll start with that is Kevin. We see that there's a bit of a mix. We believe that it is. We know that we're gaining new companies, new customers that are coming from B2B.
Speaker Change: from conversations that I've had and our commercial team has had as well as serving, we believe that there continues to be a shift from tanks.
Speaker Change: which is not shared gain on necessarily versus other POCs, other portable concentrators.
Speaker Change: But it is a share gain versus the tanks. Now, on the other side, when you look at share gain versus competitors, other portable concentrators, that's a little bit harder to measure that, but if you look at our unit growth and
It's reflective of the impact on the B to B.
Speaker Change: From 23 to 24, so we had 21% unit growth last year in the POCs, and in the first quarter or 25, we've had like, what, about 27% increase in uniform, so that, you will believe, is a strong, strong showing.
Okay, got it.
Speaker Change: And then just, you know, on the DTC business, I understand the issue of the, you know, rep count reduction and other changes you've made there, but
You know, wondering if you're, you know, what you're seeing in terms of
Speaker Change: Macro and economic environment on consumer spending. I mean, I don't know if you have a way I would assume you can measure like the close rate or something of beliefs you're generating. Have you seen any kind of you know drop there is it getting harder to close you know sales for your reps. [inaudible]
Speaker Change: and that steady intro just simply lower reps, you know, the main issue.
Mike Bourque: Yeah, no, I appreciate that question go a little deeper, they're like, when we look at this on a quarter on a quarter basis.
Speaker Change: We talked about the headcount being down, and our focus had been on rebase finding that positioning it for profitable growth going forward. One thing that I'll also note here is we're continuing to roll out that patient first initiative. We're about 75% complete with that rollout. We'll have that completed in the first half of this year.
Speaker Change: In what we've seen so far on a per rep basis year on year, we have higher unit volume per rep, we have higher revenue
Speaker Change: that equal comparison year-on-year rep count that will show favourability once we approach the back end here.
Okay. God, thank you.
Speaker Change: Thank you. Our next question is from the line of Margaret Andrew with William Blair, please receive it with your question.
Margaret Andrew: Hey, good afternoon. Thanks for taking the question. I wanted to touch on a couple different things. One was just touching on guidance.
Margaret Andrew: You know, you guys are talking about a lot of new customers, you know, you've seen the B2B beats globally. So maybe walk us through, you know, was this above the prior guidance range and, you know, maybe as these new customers ramp, you know, why shouldn't we assume some continued traction there or maybe you're not assuming that.
. . . .
Oh, oh, maybe stop there and then I'll call up [inaudible]
Margaret Andrew: Let's start with that one. First of all, when we provide a guidance, as you know, we didn't get into the channel guidance by channel. But I can answer the question in terms of like, how do we build to that low end to high end of the guidance range?
Margaret Andrew: We approach it really, and it starts with the base of the AOP, that we debit robust process, bottoms-up process.
Margaret Andrew: We look at it like it would normally think, right? We have plus to the minuses, and as we look at waiting those and then determining, okay? At the low end of the range, to get from the low end of the range to the high end of the range, we need to execute on a lot more on these certain upsides.
Margaret Andrew: The more those upsides we execute on, the higher the rates we go and even potentially being. So, without getting into the specific details about...
Margaret Andrew: You know that the exact guidance by channel which we typically, you know, we don't do, I'm hopefully it gives us the general idea of how we've built things and how we're looking at it and how we ended up with that. The other thing I would say is that it just reiterated our guidance philosophy really. I think we've kind of shown this over the course of time that Kevin and I have been here. We, you know, we want to provide guidance that's realistic and achievable and prudent guidance. So that's how we approached, you know, approach this year and we, we, that's been our approach and it'll continue to be our approach.
Michael Matson, Michael Matson, Ryan Peterson
Speaker Change: Okay, no this is fair and often and I appreciate that on the same token you guys did beat in the first quarter so I'm just trying to get a sense that if there are you know underlying macro issues or something that you are baking into this guidance. [inaudible]
Margaret Andrew: or maybe not a continuation of some of these customers. So we can get a sense of while it's conservative, you know, here are the pushes and pulls maybe that we're just trying to be conservative or maybe there is some kind of a change versus what we saw in the course quarter.
Margaret Andrew: Yeah, so you know, what they might be, hopefully there I can just add in a little bit more, but this Kevin is is we look at the B2B in particular. We did have last year towards B it was towards the end of the first quarter we brought on a larger national B2B customer.
Margaret Andrew: That was, they started ordering at the end of the first quarter so that adds a little bit to the baseline now as we go forward through this year. We do anticipate, although we're not guiding by channel, we do anticipate continued growth year on year in the B2B.
Margaret Andrew: which would be offsetting that unfavorable comparison from a DTC perspective.
Speaker Change: Okay, now that's the helpful thing, sir, for a little bit extra complex, Kevin.
Margaret Andrew: And then, you know, as we look at the, the op-ex as well, you know, G&A pulled back just on a sequential basis, R&D pulled back on a sequential basis. Again, you guys sort of reiterated the same guidance range you had last time, but...
Margaret Andrew: I think this was the first positive suggested EBITDA performance in the first quarter since 2021. So, you know, Kudos to the team for achieving that.
Margaret Andrew: So as we think about where those dollars, maybe from the beat this quarter go in the coming quarters, you know maybe walk this through that that.
Edward R. Famsch, thank you.
Margaret Andrew: Yeah, I guess to answer your question about off-bex, that's what we're getting at, you know, I think we haven't got into off-bex, but what we have said is that our expectation is that as a percentage of revenue we continue, we see lower off-bex in 2025 versus 2024, I would add to that that, you know, if we look at off-bex, say over the past year plus, [inaudible]
Margaret Andrew: When you exclude the impairment in a goodwill in 2023, we're down about 2% from 23 to 24 but as we looked at the second half of 2024, we're down about 5 and a half percent [inaudible]
Margaret Andrew: in our backs, and as you know, probably noted, we were down about 13% in Q1 of this year versus Q1 of last year. I would just add to that, one thing to that, Margaret, is that
Speaker Change: You know, I wouldn't use Q1 up next to the proxy for the rest of the year. We have, you know, a couple of things that we were planning on.
Speaker Change: You want to slip a little bit into the further quarters, but we have certainly still in line with the expectation of continue to manage our costs, to continue to watch our expenses, and we will still expect to see a lower op-ex as a Senate revenue in 2025, the last year.
Great, really appreciate it guys, congrats [inaudible]
Thanks, Marty.
Speaker Change: Thank you. At this time, we've reached end of our question and answer session and that will also conclude today's teleconference. You may now disconnect your lines at this time. We thank you for your participation and have a wonderful day.