Inogen, Inc. (NASDAQ:INGN) Q4 2023 Earnings Call Transcript
Inogen, Inc. (NASDAQ:INGN) Q4 2023 Earnings Call Transcript February 27, 2024
Inogen, Inc. misses on earnings expectations. Reported EPS is $-1.14 EPS, expectations were $-0.65. Inogen, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to the Inogen 2023 Fourth Quarter Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce to you, Marissa Bych from Gilmartin Group. Thank you, Marissa. You may begin.
Marissa Bych: Great, thank you. And thank you all for joining today's call. Joining me are President and CEO, Kevin Smith; and Interim CFO, Mike Sergesketter. Earlier today, Inogen released financial results for the fourth quarter of 2023 and full year 2023. The earnings release is available on the Investor Relations section of the company's website, along with the 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, our 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 and 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 reports filed with the Securities and Exchange Commission. Actual 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. 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 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. 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 fourth quarter 2023 conference call. During today's call, I will provide insight into my experiences during my first months as CEO, outline our strategic priorities going forward, share a few highlights from the recent quarter. 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 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. 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 business. As I strategize our path forward, I'm pleased to welcome two additional new leaders to our team. We are thrilled to have appointed Gregoire Ramade as Chief Commercial Officer in January. Greg's experience will help improve Inogen's products, commercial strategy and customer experience. We also look forward to bringing on Michael Bourque 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, NFP and ATMs. I am confident that both their additions are step towards achieving Inogen's full potential.
I would like to share insights into Inogen strategic priorities going forward. Our top priority is positioning the business for revenue growth. An important piece of this process is the pursuit of regulatory clearance for PhysioAssist introduction to the U.S. market. 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're available. We will also be pursuing a 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. Advancing our innovation pipeline with transformative technologies is also a key priority.
We are advancing developments 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 capabilities 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 loyalty. 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 globe.
Now I would like to highlight our accomplishments during the fourth and full year 2023. We achieved $76 million in total fourth revenue and $316 million in fiscal year 2023 revenue. Our recent sales were in part driven by the full launch of Rove 6 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 therapy patients. Baseline mobility was strongly correlated to lower risk of mortality over a 72-month period in mobile patients using POCs with higher duration of autonomy at 9 months longer median overall survival.
Lower risks of hospitalizations and ER visits and consequently lower healthcare resource utilization costs than patients using POCs with shorter duration of autonomy. This further reinforces that patient mobility is key to their health and well-being and using the devices that are compatible with it and do not restrict it have 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. 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, ability to track patient breaths per minute and error and maintenance notifications linked to specific devices.
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 referrals. As part of the 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 ensuring 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 structure. Before I turn the call over to Mike, 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 in our market leadership, differentiated product offering and brand recognition. We expect that there may be a void in the market and if so we will be ready to step in and fill it. I'll now turn the call over to Mike for a more detailed review of our financial results. Mike?
Mike Sergesketter: 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. 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. Looking at fourth quarter revenue on a more detailed basis, direct to consumer sales decreased to 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 percent 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 and business revenue increased 4% to $21.5 million in the fourth quarter 2023, compared to $20.7 million in the prior period, primarily driven by the addition of PhysioAssist Simeox sales revenue, partially offset by competitive pricing pressure and an increasing cost of capital. General revenue increased 10.6% to $16.5 million in the fourth quarter of 2023 from $14.9 million in the prior period. Gross was driven primarily by an increase in the number of patients on service.
Now on to 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 cost, 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 cost. 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. 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 price components.
Moving on to operating expense, in the fourth quarter total operating expense decreased $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, partially offset by the change in fair value of earn out liabilities and certain onetime cost related to CEO transition and bad debt expense. 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 On an adjusted basis, we reported a net loss of $19.4 million and an adjusted loss per diluted share of $0.83 Adjusted EBITDA was a loss of $17.3 million. 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. 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%. Excluding the onetime non-cash 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 8.9%, primarily driven by the change in the fair value of the earn out liabilities.
GAAP net loss was $102.4 million compared to a GAAP net loss of $83.8 million for the full year 2022. Adjusted net loss was $48.3 million compared to adjusted net loss of $26.2 million for 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 Q1 of 2023. With that, I will pass the call back to Kevin for closing remarks.
Kevin Smith: The start of 2024 opens a new chapter for Inogen. I remain optimistic for 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 Physio Assist to our portfolio. While there's much work to be done, our team is equipped to handle the challenges ahead. Before turning it over for questions, I would like to take a moment and thank Mike for stepping in the interim CFO role for the past six months. His presence has been an immense benefit to myself and the company during this time. With that, I will open it up for questions. Operator?
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