Inogen(INGN) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2022, Inogen reported a year-over-year constant currency revenue growth of 14.5% [8][23] - The company experienced a net loss of $9.5 million, with a diluted loss per share of$ 0.42, while the adjusted net loss was $4.1 million, or$ 0.18 per diluted share [27] - Total operating expenses increased to $53.1 million from$ 41.3 million in Q3 2021, with increases across all categories [26] Business Line Data and Key Metrics Changes - Domestic direct-to-consumer sales decreased by 9.1% to $33.1 million, primarily due to lower volume and higher Medicare reimbursement rates [24] - Rental revenue gross margin was 54.5%, down from 58.9% in Q3 2021, driven by increased service costs and device write-offs [25] - The rental business revenue increased by more than 25% for the first nine months of 2022 compared to the same period in 2021 [15] Market Data and Key Metrics Changes - Foreign exchange had a negative impact of 130 basis points on total revenue and 550 basis points on international revenue [23] - The company is cautiously optimistic about European regulatory clearances, with ongoing reviews progressing as expected [19] Company Strategy and Development Direction - Inogen's strategic pillars include driving market penetration in oxygen therapy, accelerating new product introductions, and diversifying the portfolio [10] - The company plans to expand its portfolio and global presence through inorganic efforts at the right time [10] - In the medium to long term, Inogen anticipates introducing a pipeline of new and improved portable oxygen concentrators (POCs) [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic and inflationary pressures but emphasized a focus on internal levers to mitigate risks [8] - The company aims to return to positive free cash flow by late 2023 and beyond, with a strong balance sheet and cash position [21] - Management expressed confidence in the underlying demand for offerings, despite potential supply chain challenges [20] Other Important Information - The company is actively managing supply chain challenges, particularly regarding semiconductor inventory [14] - Inogen has made significant investments in R&D, with total spending of$ 4.6 million in Q3 2022 [26] Q&A Session Summary Question: What is the demand picture in the US DTC and B2B businesses? - Management noted that there has not been a major softening in demand, with healthy conversations about ending the year strong [34][36] Question: What percent of the OUS business can be sold into, and will there be a gap in approvals? - Management remains cautiously optimistic about EU and BR certificate approvals and believes they can cover potential revenue gaps [38] Question: How do inflation and labor shortages affect the economics of POCs? - Management indicated that while inflation may favor rental models slightly, the demand for POC-based therapy remains strong [41] Question: Can you size the backlog remaining with US customers? - Management refrained from quantifying the backlog but noted significant remediation of backlog orders [45] Question: What factors influence guidance for Q4 and 2023? - Management highlighted the importance of supply visibility and indicated that they do not expect significant changes in growth rates moving forward [54][60] Question: How will advertising and sales rep counts change as supply improves? - Management stated that advertising spend will be tailored based on supply situations, and they will continue to optimize performance across all teams [62]