Q2 2025 Inogen Inc Earnings Call

Speaker #4: Welcome to Energen's second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session.

Speaker #4: To ask a question at that time, please by one on your touchtone phone. If anyone has difficulty hearing the conference, please press star zero for operator assistance.

Speaker #4: As a inder, this conference is being recorded today. August 7th, 2025. I would now like to turn the call over to Lorna Williams, SVP, of investor relations and strategic planning.

Speaker #5: Thank you for participating in today's call. Joining me are President and CEO Kevin Smith and CFO Mike Bourque. Earlier today, Energen released financial results for the second quarter 2025.

Speaker #5: The earnings release is available in the investor relations section of the company's website. Along

Speaker #5: with a supplemental financial package, as a result, the information presented today will include forward-looking statements, including without limitation statements about our growth prospects and strategy for 2025 and press star followed beyond, expectations related to our financial results for the third quarter, and full year 2025.

Speaker #5: Progress on our strategic initiatives, including innovation, our expectations regarding the market for our products and our , and supply and demand for our products in short term and long term.

Speaker #5: The forward-looking statements in this call are based on information currently available to us as of today's date. August 7th, 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 #5: 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 may also present certain financial information on a non-GAAP basis.

Speaker #5: Management believes that non-GAAP financial measures taken in conjunction with US 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 Energen's core operating results.

Speaker #5: Management uses non-GAAP measures internally to understand, manage, and evaluate our business and make operating decisions. Reconciliations between US GAAP and non-GAAP results are presented in tables within our earnings release.

Speaker #5: With that, I will turn the call over to Energen's President and CEO, Kevin Smith.

Speaker #6: Good afternoon, and thank you for joining our second quarter 2025 conference call. Today, I'll share more detail in our progress across our three strategic imperatives: driving top-line growth, advancing our path to profitability, and expanding our innovation pipeline.

Speaker #6: Afterwards, Mike will provide further financial details and our updated outlook. First, advancing top-line growth remains central to our purpose and goals. This quarter, we achieved our sixth consecutive quarter of mid-single-digit growth compared to the prior year, delivering approximately $92 million in revenue.

Speaker #6: We have continued to drive encouraging performance, resulting in unit growth of 19% in overall unit volumes as a result of continued market conversion from portable oxygen tanks to portable oxygen concentrators, or POC.

Speaker #6: early stages of a promising turnaround, driving top-line growth. Disciplined execution has brought us to an inflection point regarding adjusted EBITDA positivity. We've established a track record of meeting or exceeding our financial goals as we advance Energen is in the our presence in the large growing COPD market with low POC penetration.

Speaker #6: In fact, over the next five years, POCs are expected to increase from an estimated 23% to 58% of the the US. Our strategy focuses on increasing patient access, leveraging our brand strength, and expanding our portfolio through new products, indications, digital capabilities, and geographic reach, which together provide us an opportunity to increase our addressable market.

Speaker #6: With these opportunities in front of us, we are confident in our ability to accelerate growth, enhance profitability, and drive long-term shareholder value. In the second quarter, we completed the rollout of our patient-first initiative, which is a program based on the belief that any patients in need of oxygen therapy should be able to receive an Energen device easily.

Speaker #6: Through the cross-training of sales representatives to execute both cash sales and insurance rentals, this marks an important step forward in strengthening our direct-to-consumer sales and rental channels.

Speaker #6: We are also seeing steady improvements in crucial metrics of sales team success, for example, close rates are already trending up as we continue enhance our training programs, refine our commercial approach, and expand our product offerings.

Speaker #6: With our Salesforce-size stabilized in the initiative now fully implemented, we expect to see more favorable year-over-year comparisons towards end of the third quarter and remain focused on driving stronger performance across the sales organization.

Speaker #6: We added several new private payers during the quarter. Reflecting our ongoing efforts to expand access and strengthen our rental business, looking ahead, we remain focused on driving operational efficiency and further optimizing performance across our rental operations.

Speaker #6: In the quarter we reported, strong momentum in our business-to-business channels with growth of approximately 18%. The team has done an excellent job strengthening relationships with DMEs and winning tenders internationally.

Speaker #6: These results bolster our confidence in our total market approach and the strength of the Energen brand. Turning to our second priority, driving profitability, where we continued to advance through operational excellence and disciplined cost management.

Speaker #6: In the second quarter, we delivered meaningful operating leverage, reducing operating expenses by approximately 5% year-over-year and generating $2.0 million in adjusted EBITDA. This is our second consecutive quarter of adjusted EBITDA profitability.

Speaker #6: It also marks the fourth adjusted EBITDA profitable quarter out of the last five, highlighting consistent execution of our strategies and disciplined expense management. As a , we now expect to achieve full year adjusted EBITDA break-even in 2025, supported by sustained revenue growth and disciplined spending.

Speaker #6: We remain focused on driving further improvements in the coming years, as we advance towards sustainable profitability. We continued to advance our innovation pipeline this quarter with meaningful progress across our key strategic priorities.

Speaker #6: We introduced Boxy5, our latest stationary oxygen concentrator designed to expand access to high-quality therapy for long-term care patients. We also continue developments of clinical data for Simiox around the world and launched a new mobile digital health portal.

Speaker #6: I'll begin with Boxy5, our newest stationary oxygen concentrator. This product is a aningful extension of our oxygen therapy portfolio, complementing our portable solutions and enabling us to serve a broader range of patients in the home care setting.

Speaker #6: Developed in collaboration with UL Medical, Boxy5 reflects the strength of our t pipeline and our ability to bring high-quality, cost-effective solutions to market. The device delivers one to five liters per minute of continuous flow oxygen in a compact, quiet, and durable form.

Speaker #6: It's a strong option for patients who need a reliable and affordable second unit for use in multiple rooms. The launch of Boxy5 also gives our sales team another valuable tool to meet the diverse needs of patients and providers, especially in the business-to-business channel where we previously did not have a stationary offering.

Speaker #6: This is critical as our DME partners generally provide new patients with both SOC and POC. And having two quality offerings will allow us to reach new customers and deepen our relationships with existing partners.

Speaker #6: We're encouraged by the early response and look forward to continued progress as the launch builds momentum in the months head. In addition, we initiated a groundwork for our clinical trials to support premium reimbursement, advancing our efforts towards Simiox commercialization.

Speaker #6: While there are no material updates to provide at this time, the overall efforts remain on track, and we will continue share pertinent information as appropriate.

Speaker #6: Lastly, we enhanced our digital health capabilities by launching an online patient portal as part of our Energen Connect solution. The patient portal is designed to be seamlessly integrated with our mobile application.

Speaker #6: Expanding access to self-service tools that improve patient engagement and streamline operations. The platform enables patients to order supplies, track shipments, access setup resources, update insurance info, and e-sign forms, all from their phones or computers.

Speaker #6: The launch supports our commitment to enhancing patient experience. We are pleased with the positive reception by early adopters and look forward to continuing to deliver tools that improve accessibility and ease of use for patients and providers.

Speaker #6: To conclude, the innovation we delivered this quarter reflects our ongoing commitments to advancing respiratory care through meaningful product development, greater affordability, and better outcomes for patients who rely on oxygen therapy every day.

Speaker #6: With that, I will pass the call over to Mike for an overview of our financials. Mike?

Speaker #7: Thank you, Kevin, and good afternoon, everyone. Unless otherwise stated, all financial comparisons presented refer to the prior year comparable period. Total revenue for the second quarter of 2025 was $92.3 million, an increase of 4% on a reported basis.

Speaker #7: The increase was primarily driven by higher demand in our business-to-business channels. Looking at second quarter revenue on a more detailed basis, domestic business-to-business revenue increased $19.3% to $25.4 million, versus $21.3 million in the prior period, driven by increased demand.

Speaker #7: International business-to-business revenue increased $17.7% to $35.9 million, compared to $30.5 million in the prior period, primarily driven by higher demand. Direct-to-consumer sales decreased $21.1% to $17.8 million, from $22.6 million in the prior period, as we continue to operate with a smaller and more efficient team.

Speaker #7: We've taken meaningful steps over the last 12 to 24 months to reshape our DTC operations focusing on efficiency and productivity to support our broader profitability goals.

Speaker #7: These changes help drive nearly 19% sequential growth in our DTC channel, nearly double the 10% sequential improvement from the prior year. This improvement strengthens our belief that our current team operating with an updated structure is well positioned for the future.

Speaker #7: Rental revenue decreased $8.6% to $13.1 million, from $14.3 million in the prior period. The decrease was primarily driven by a higher mix of lower private payer reimbursement rates.

Speaker #7: Now on to discuss gross margins. Total gross margin was $44.8% in the second quarter 2025, decreasing $335 basis points from the same period in the prior year, primarily driven by increased business-to-business sales as a percentage of total revenue.

Speaker #7: On a quential basis, gross margin increased 60 basis points, driven by higher volumes. Our cost of goods sold in the quarter included premium price components which resulted in a $121 basis points headwind to gross margin.

Speaker #7: We do not expect a material impact from these components going forward. Moving on to operating expense, in the second quarter of 2025, total operating expense decreased to $47.5 million, compared to $49.8 million in the prior period, representing a decrease of 4.7%, primarily related to a one-time bad debt expense in the prior period.

Speaker #7: Due to the timing of planned expenses for advancement of clinical trials related to Simiox commercialization, we expect operating expense to slightly increase in the second half as compared to the first half of the year.

Speaker #7: Reflecting ongoing investments in product development and commercialization. In the second quarter 2025, we reported a GAAP net loss of $4.2 million, compared to a loss of $5.6 million in the prior period and loss per diluted share of $0.15 in the second quarter of 2025, versus a loss of $0.24 in the prior period.

Speaker #7: On an adjusted basis, we had a net loss of $700,000 in the second quarter of 2025, compared to a loss of $1.6 million in prior period and an adjusted loss per diluted share of $0.02 in the second quarter 2025, compared to a loss of $0.07 in the prior period.

Speaker #7: Adjusted EBITDA was $2.1 million in the second quarter of 2025, compared to $1.3 million in the prior period. Moving on to our balance sheet, as of June 30th, 2025, we had cash, cash equivalents, marketable securities, and restricted cash of $123.7 million, with no debt outstanding.

Speaker #7: We were pleased to increase cash by 1.2 million in the quarter. We also generated $4.4 million in operating cash flow in the second quarter, a testament to the health of our business and a result of our focus on working capital optimization and expense management.

Speaker #7: On that note, I will now discuss our full year 2025 and third quarter financial outlook. We now expect full year 2025 reported revenue to be in the range of $354 million to $357 million, reflecting 6% growth at the midpoint relative to the full year 2024.

Speaker #7: For the full year 2025, we now expect to reach adjusted EBITDA break-even. For the third quarter of 2025, we expect reported revenue to be in the range of $91 million to $93 million, reflecting 4% growth at the midpoint relative to the third quarter of 2024.

Speaker #7: Given our current exemptions for certain medical devices, we continue to expect no material impact from tariffs on our gross margin and adjusted EBITDA. However, we will closely monitor developments and will share updates as appropriate.

Speaker #7: Our turnaround is progressing well with mid-single-digit top-line growth and disciplined execution. These results highlight the strength of our strategy and position us to drive sustainable performance and create long-term shareholder value.

Speaker #7: And with that, I will pass the call back to Kevin.

Speaker #6: Thank you, Mike. We're proud of the progress made this quarter, as we sharpened our focus on operational discipline, launched new products, and advanced our innovation efforts.

Speaker #6: The introduction of Boxy5 opens new doors in stationary oxygen therapy, and we continue to lay the groundwork for future growth through investments in digital health and our broader innovation pipeline.

Speaker #6: With a solid foundation in place, we're entering the second half of the year with confidence and a clear path forward. With that, operator, please open the call for questions.

Speaker #4: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad and confirmation tone will indicate that your line is in the question queue.

Speaker #4: You may press star two to remove yourself from the queue. For participants using speaker equipment, they may be necessary to pick up their handset before pressing the star keys.

Speaker #4: One moment while we poll for questions. And our first question comes from the line of Anderson Shock with B Riley Securities. Please proceed with your question.

Speaker #8: Hi. Thank you for taking the estions and congrats on a really strong quarter. So first, uld you talk about the initial demand you've seen for Boxy5?

Speaker #8: How should we think about the revenue contribution for this in the back half of the year, and what percent of new Boxy5 users are also being prescribed one of your POCs alongside it?

Speaker #6: Thanks, Mike. I'll go ahead and start with that. And thanks, Anderson. And I appreciate the comment there too. The well, we look at Boxy5 so we just launched that, of course, as you'll hear recently.

Speaker #6: And we're excited with what we've seen so far from that. The it's baked into our guidance for the rest of the year. We do see opportunity for that to have an impact more in the fourth quarter than it would than it would earlier, but that is that is baked into the guidance that we have already provided.

Speaker #6: But I think it's one thing that's important to note when you ask about the about the market for that and what's the what the contribution will be for the company going forward.

Speaker #6: When we look at the patients that have a portable oxygen concentrator versus a stationary concentrator, look at the look that population that has long-term oxygen.

Speaker #6: Nearly 100% of those, over 90% certainly, have an SOC. So that is nearly every patient that's on long-term oxygen therapy. Portable oxygen concentrators are used with about 23% of that population.

Speaker #6: So it is a significant increase in our addressable markets, the that Boxy5 brings for us. So that is something as we look at going forward and we look at our path towards double-digit growth and sustainable profitability, that represents a significant uplift for us in the ure.

Speaker #4: Okay. Got it. Thank you. That's helpful. And then do you have any updates on the reimbursement for Simiox and how should we ink about this impacting the timing of a full commercial launch?

Speaker #6: Yeah. So Simiox, we are working towards the towards the reimbursements. We have we have a number of processes that are going forward to generate health economic data.

Speaker #6: The clinical data to make sure that we maximize that reimbursement. We are focused not just on reimbursement in the United States, but certainly across the globe.

Speaker #6: We have trials that are going internationally that would support our European as well as other international markets. We're tracking that. We are happy with the progress that we've been making.

Speaker #6: And we have not yet guided towards timing on that externally, but we are we're happy with the progress that we've been making there. And I will say too that that is, yeah, when we look at the Simiox and what that represents for us in the future, we talk expanding our pipeline and Energen being a form play.

Speaker #6: The SOC is the as the first opportunity for us to really go beyond the portable oxygen concentrators, especially on a large scale, not the not on a niche play.

Speaker #6: And when we look at airway clearance and what Simiox ultimately represents for us, again, that is a that is a high-margin razor-razor blade product that that we're looking forward to.

Speaker #6: But at the appropriate time, we'll provide some additional guidance on timing.

Speaker #4: Okay. Thank you for taking our questions, and congrats in on the great arter.

Speaker #6: Thanks.

Speaker #4: Thank you. And our next question comes from the line of Robbie Marcus with JPMorgan. Please proceed with your estion.

Speaker #9: Hey. This is actually Rohan on for Robbie. Thanks for ing the question. I just wanted to start with guidance. You raised the guide by the size of the beat and was hoping you could provide some segment-level commentary just for the balance of the year and how you're thinking about the fundamentals.

Speaker #10: I sure will not take that. This is my I think the best way maybe to explain guidance really talked a little bit about what our rationale was as we entered into this the second half of the year.

Speaker #10: So if you look at second half growth is expected to be 7% of the midpoint of the guidance. And that would be with mid-single-digit revenue growth in Q3.

Speaker #10: And low double-digit revenue growth in Q4. Historically, Q2 and Q3 have been our strongest quarters, with Q3 revenue roughly in line with Q2. And our outlook reiterates that trend.

Speaker #10: I think we've said before in that in Q4, we expect to have lapsed the year-over-year Salesforce changes and our DTC business. So we expect to see performance stabilizing in the fourth quarter.

Speaker #10: We do continue to expect B2B growth and, as Kevin alluded to earlier, we we talked the Boxy as not being significant to our 2025 results, being more meaningful in '26 going forward.

Speaker #10: But we do expect some level of contribution from the Boxy launch. And that's what's driving that double-digit overall Q4 growth.

Speaker #9: Got it. That's helpful. And then I have a follow-up just on adjusted EBITDA and profitability. You guided to break-even for the year, and I also believe that I heard positive cash flow from operations.

Speaker #9: In quarter as well, so maybe if you could talk more about some of the drivers behind profitability in your outlook as well as some of the working capital adjustments.

Speaker #9: And when should we expect for the company to reach free cash flow break-even? Thanks.

Speaker #10: I'll take that one as well, Rohan. I think the way probably to phrase this is our focus has been on profitability. We've talking about that for quite some time now.

Speaker #10: Q2 marked the second quarter. A positive adjusted EBITDA as we continue to execute our strategy. Overall, we're really pleased with the progress of profitability with positive adjusted EBITDA in the last two quarters.

Speaker #10: In fact, we've reported positive adjusted EBITDA in four of the five last quarters. I think it'd be this is a good time to talk about profitability metrics.

Speaker #10: What do I mean by that? I'm talking operating income, adjusted operating income, net income, adjusted net income, EBITDA, and adjusted EBITDA. When ou look at these, these metrics, they're all favorable for every quarter over the past year and a half compared to the prior period.

Speaker #10: The comparable prior period. So I would just say we're really pleased with the execution of over the past year and a half on that priority as we continue to drive towards that path to profitability.

Speaker #10: Hopefully, that answers that question. In terms of cash, yeah, we're pleased to have generated $1.2 million in cash in the second quarter of year.

Speaker #10: We've also generated about $4.5 million of cash from operations and about $0.5 million of positive free cash flow. We really haven't guided to any future cash forecasting.

Speaker #10: However, you know we'll continue to look our cash balance, our allocation, focus on the egic needs of our business, with a balance between maintaining an adequate cost structure and investing in the company where we see favorable returns on investment.

Speaker #10: With all that being said, as we said in the past, we're very comfortable with our current cash position and our ability to fund all aspects of the as eded.

Speaker #9: Thank you.

Speaker #4: Thank you. And our final question comes from the line of Mike Mattson with Needham and Company. Please proceed with your estion.

Speaker #11: Yeah. Thanks. So another one on Boxy5, just wondering can you comment at all on the pricing and gross margins of that product and you know particularly interested in how it compares to the POCs?

Speaker #11: Is it substantially above or below POCs on either of those metrics? And if you can give us this more specifics, that'd be helpful. But yeah.

Speaker #10: Yeah. I ink, Mike, in terms of when we you know as you know, we really we don't guide in terms of revenue per channel, even in getting into the expected margins.

Speaker #10: You know we've our reporting has been basically in terms of gross margin has been based on looking at sales gross margin and rental gross margins.

Speaker #10: So we really you know rather not get into the expectation of what we look for in terms of gross margin for that product, it would be different when you look at some of our other products and you look our our different channels, right?

Speaker #10: So D2C, obviously, and we look at what we sell you know a unit to one single patient versus what we sell hundreds of units, say, to a B2B customer.

Speaker #10: You know price will be different based on that. And therefore, gross margin would also be you know different based on what channel. And we do look at the Boxy5 as the ability to really enhance all those channels.

Speaker #11: Yeah. And I think I'll just add on to that is it's you ow overall, we do see that as a key piece on our path to profitability.

Speaker #11: And when we look at this, as Mike was saying, we look at different segments. In the Boxy5, it its into each of our segments.

Speaker #11: It is an opportunity for us when we look at the rental channel. It will improve our profitability in the rental channel as well as give our salespeople an opportunity to sell in Energen package for patients rather than just the Energen POC plus a different stationary concentrator for those patients.

Speaker #11: For the DTC, that's a higher margin sale as Mike was talking about, even though we have them quantified that. But we are happy with what we've seen as we've launched the Boxy5 that we are selling those to patients for cash through that through our DTC channel.

Speaker #11: Those are that's more sales per patient, more revenue in a and it's a it's an opportunity for us to continue to where to bolster that.

Speaker #11: And when we look at this from contributing to overall profit, it's one thing to keep in mind that this is it's the same patient.

Speaker #11: It's the same physician. Same customer. We're looking our B2B channel. It's the same sales rep. So we're able to leverage the existing organization as well as our branding.

Speaker #11: Yeah. Okay. That all makes sense. And then I thought I heard something in the the prepared remarks when you were talking about operating expenses.

Speaker #11: You correct me if this is wrong, but I thought I heard that there was a mention of a Simiox trial or something. Is that right?

Speaker #11: And I guess why are you running the trial? Is it to support the marketing of the product? Is it to support reimbursement of the t?

Speaker #11: Or clearance or something else? Or?

Speaker #10: Yeah. It's yeah. Yeah. Thanks for asking for the clarification. It is for we have trials that are running in you know both outside the United States and inside the United States.

Speaker #10: And that are related to reimbursement. So developing the health economic data that is that is needed with the value dossier to support reimbursement. As well as as well as the trials that are designed to to boost acceptance and and and develop marketing claims.

Speaker #10: So there's there's different sides of that. We like the data that we've been seeing. We like the feedback that we've that we've had. But the the ones that I'm referring to specifically here in the United States are related to developing health economic data supporting reimbursement.

Speaker #11: Okay, got it. And then just wondering where things stand with developing—or maybe enhancing is a better word—your kind of connectivity features on your products?

Speaker #11: Because it seems like you know there could be some synergies there now that you have the the SOC and the POC where you know if they were both internet-connected and using the same kind of software, you know platform to track location, maintenance, etc.

Speaker #11: for the for the DME customer as well as you know for the patient, having their own sort of data in there, that that could kind of you ow sort of tie those products together better and create a you know more synchronous between them where you know if you're buying one, you want to uy the other one.

Speaker #11: You know.

Speaker #10: I couldn't have said it better myself. It's the your your spot on with that. That is you know when we're looking at our our connectivity and our digital health, we are creating an ecosystem and and and part of that is to drive that brand preference, that loyalty, adding value back to, as you said, with the with our B2B customers to be able to monitor device health, to be able to interrogate devices for to be able evaluate those in the field as they get calls back from patients to you know to consider if they have a question on something.

Speaker #10: Also, to be able to provide you know easier ways to you know the patients to be able to access information, to be le to order supplies, and you ow and general value that we're able to add there.

Speaker #10: But that is something that when we look at not just the the technology that we have today in the field, but looking future ones to be able to wrap everything into that same ecosystem and tie them into the into our connected applications.

Speaker #11: Okay. Got it. Thank ou.

Speaker #4: Thank you. And with that, there are no further estions at this time. I would like to turn the call back to Kevin Smith for closing remarks.

Speaker #11: Thank you. And I'd ike to take a minute here and reinforce some previous points. In our second quarter, that represented another strong step forward in executing our strategic priorities and delivering solid financial performance.

Speaker #11: With significant opportunities ahead, we remain confident in our ility to accelerate revenue, enhance profitability, cash flow, and drive long-term value for our shareholders. This quarter marks our sixth consecutive period of year-over-year mid-single-digit top-line growth.

Speaker #11: Fueled by continued strength across both our domestic and international business-to-business channels, we also made meaningful strides in profitability. Achieving our second consecutive quarter and fourth quarter out of the last five, of positive adjusted EBITDA while generating $1.2 million in cash.

Speaker #11: These are important milestones in our path to sustained profitability. The successful launch of Boxy5 expands our SOC portfolio and improves access to high-quality oxygen therapy for long-term care patients.

Speaker #11: We also advance our digital health capabilities and made important progress towards the commercialization of Simiox. And as we look ahead to the second half of 2025, we remain focused on disciplined commercial and operational execution.

Speaker #11: We're encouraged by the momentum across the business and excited about what's to come. And I'm proud of the team's commitments and excellent performance during the first half the year.

Speaker #11: Looking ahead, I'm confident in our collective ability to meet our goals. Our ongoing efforts to drive revenue growth, enhance profitability, and expand our innovation pipeline position us well for continued progress in the second half of the year.

Speaker #11: But before we conclude, I want to take a moment and thank the incredible team at Energen: your dedication, resilience, and passion for improving the lives, or what drives our success.

Speaker #11: Every milestone we've reached this quarter is a direct reflection of your hard work and commitment. Energen is more than a company. It's a community of innovators, caregivers, and problem solvers.

Speaker #11: It's a place where people come to make a difference, and I'm proud to say it's a truly great place to work. So thank you for all that you do.

Speaker #11: We look forward to continuing this journey together.