Inogen Announces Fourth Quarter 2020 Financial Results

– Q4 2020 Total Revenue of $74.0 million –

Q4 2020 Rental Revenue of $9.4 million, up 71.7% from the same period in 2019 –

GOLETA, Calif.–(BUSINESS WIRE)–Inogen, Inc. (NASDAQ: INGN), a medical technology company offering innovative respiratory products for use in the homecare setting, today reported financial results for the three- and twelve-month periods ended December 31, 2020.

Fourth Quarter 2020 Highlights

  • Total revenue of $74.0 million, down 6.3% from the same period in 2019, primarily due to the impacts of the COVID-19 pandemic
  • Domestic business-to-business sales of $24.2 million, up 17.9% from the same period 2019
  • Rental revenue of $9.4 million, up 71.7% from the same period in 2019
  • Net loss of $5.1 million and Adjusted EBITDA of $3.0 million (see accompanying table for reconciliation of GAAP and non-GAAP measures)
  • Cash, cash equivalents, and marketable securities were $231.2 million with no debt outstanding as of December 31, 2020

Full Year 2020 Highlights

  • Total revenue of $308.5 million, down 14.8% versus 2019, primarily due to the impacts of the COVID-19 pandemic
  • Increased focus on rentals leading to a 32.3% increase in rental revenue, primarily due to a 27.3% increase in patients on service and an improved rental gross margin of 52.1% in 2020 compared to 34.1% in 2019
  • $22.1 million increase in cash, cash equivalents, and marketable securities as of December 31, 2020 compared to December 31, 2019

“While the COVID-19 pandemic continued to have a significant effect on our business in the fourth quarter of 2020, primarily in the direct-to-consumer and international business-to-business sales channels, we are pleased with the rebound in performance that we saw in our domestic business-to-business channel which exhibited double-digit growth in the fourth quarter of 2020 over the comparable period of the prior year,” said Inogen’s newly appointed President and Chief Executive Officer, Nabil Shabshab. “Additionally, our recent focus on the rental channel produced strong operating performance with rental revenue growing significantly in the fourth quarter of 2020 versus the comparable period in the prior year.”

Fourth Quarter 2020 Financial Results

Total revenue for the three months ended December 31, 2020 declined 6.3% to $74.0 million from $78.9 million in the same period in 2019.

Domestic business-to-business sales in the fourth quarter of 2020 increased 17.9% to $24.2 million compared to $20.6 million in the fourth quarter of 2019. The Company believes this increase was primarily a result of the unfulfilled orders in the fourth quarter of 2019, which led to an easier comparable period in the fourth quarter of 2020, and increased demand for portable oxygen concentrators (“POCs”) as hospital systems and stationary oxygen concentrator supply were strained to keep up with the rapid increase in COVID-19 cases. In addition, the Company believes the resolution of the competitive bidding uncertainty in October 2020 also contributed to increased demand in the quarter, which was partially offset by lower reseller customer demand in the comparative period.

International business-to-business sales in the fourth quarter of 2020 decreased by 20.4% (23.8% decrease on a constant currency basis) to $13.6 million compared to $17.1 million in the fourth quarter of 2019. The Company believes the decrease was primarily driven by the resurgence of the COVID-19 pandemic in the quarter causing additional lockdowns in many European countries along with reduced operational capacity of certain European respiratory assessment centers.

Direct-to-consumer sales decreased 25.2% to $26.8 million in the fourth quarter of 2020 from $35.8 million in the fourth quarter of 2019. The Company believes the decrease was primarily driven by the impact of the COVID-19 public health emergency (“PHE”) on consumer travel, mobility, and consumer confidence, as well as an approximately 6% reduction in average inside sales representative headcount versus the fourth quarter of 2019, and an increased focus of inside sales representatives’ time on new rental setups. As of December 31, 2020, the Company had a total of 300 inside sales representatives, down from 329 as of December 31, 2019.

Rental revenue in the fourth quarter of 2020 increased to $9.4 million from $5.4 million in the same period in 2019, an increase of 71.7%, primarily due to increased patients on service, higher billable patients as a percent of total patients on service, higher Medicare reimbursement rates, and lower rental revenue adjustments. As of December 31, 2020, the Company had approximately 32,200 patients on service, which was up 9.2% sequentially compared to September 30, 2020, and up 27.3% compared to December 31, 2019. The increase in patients on service was primarily driven by greater utilization of leads for rental opportunities and initiatives to increase physician awareness by the Company’s sales force. As of December 31, 2020, the Company had a total of 24 physician sales representatives, up from 17 as of December 31, 2019.

Total gross margin was 46.0% in the fourth quarter of 2020 versus 43.0% in the comparative period in 2019. Sales revenue gross margin increased to 44.5% in the fourth quarter of 2020 versus 43.0% in the fourth quarter of 2019. This increase was primarily due to lower manufacturing cost per unit in the quarter due to certain manufacturing inefficiencies experienced in the comparable period of 2019 and lower warranty cost per unit. These increases were partially offset by higher labor and overhead cost per unit and lower average selling prices due to an increased mix of domestic business-to-business sales, which have a lower gross margin than direct-to-consumer sales. Rental revenue gross margin increased to 56.5% in the fourth quarter of 2020 versus 43.3% in the fourth quarter of 2019, primarily due to higher billable patients as a percent of total patients on service, higher Medicare reimbursement rates, lower rental revenue adjustments, and lower depreciation expense per patient on service.

Total operating expense increased to $39.6 million in the fourth quarter of 2020 versus $39.2 million in the fourth quarter of 2019, primarily due to an increase in the fair value of the New Aera earnout liability and higher personnel-related expenses, partially offset by lower legal and consulting expenses and a reduction in product incentives and advertising. Research and development expense increased to $3.7 million in the fourth quarter of 2020 versus $3.6 million in the comparative period in 2019, primarily associated with increased product development costs. Sales and marketing expense decreased to $25.4 million in the fourth quarter of 2020 versus $25.5 million in the comparative period in 2019, primarily due to decreased product incentives and advertising expenditures, partially offset by increased personnel-related expenses. Advertising expenditures were $9.3 million in the fourth quarter of 2020 compared to $9.5 million in the fourth quarter of 2019. General and administrative expense increased to $10.5 million in the fourth quarter of 2020 versus $10.1 million in the comparative period in 2019, primarily due to a $0.4 million increase in the fair value of the New Aera earnout liability and increased recruiting costs, partially offset by lower legal and consulting expenses.

The Company reported an operating loss for the three months ended December 31, 2020 of $5.5 million and Adjusted EBITDA of $3.0 million.

In the fourth quarter of 2020, the Company reported a net loss of $5.1 million with loss per diluted common share of $0.23.

As of December 31, 2020, the Company had cash, cash equivalents, and marketable securities were $231.2 million with no debt outstanding.

Financial Outlook for 2021

Because of the unprecedented market uncertainties, the Company is unable to provide guidance for the full year 2021. Given the uncertain scope and duration of the COVID-19 pandemic, the Company is unable to estimate the impact on its financial results, including revenue, net income or loss, and Adjusted EBITDA estimates for such period.

As the Company saw in the fourth quarter of 2020, demand has increased so far in the first quarter of 2021 from the Company’s domestic HME partners in part, due to increased demand for POCs as hospital systems and stationary oxygen concentrator supply have been strained to keep up with the rapid increase in COVID-19 cases. While the Company does not know how long this increased need for POCs will continue, the Company expects its domestic business-to-business sales to increase in the first quarter of 2021 versus the comparative period in the prior year. In addition, the Company expects its rental revenue to grow in the first quarter of 2021 compared to the same period in the prior year due to increased patients on service, higher billable patients as a percent of total patients on service, and higher average reimbursement rates. However, the Company also expects its international business-to-business and direct-to-consumer sales channels in the first quarter of 2021 to decrease compared to the same period in the prior year as a result of the continued COVID-19 impact on these channels.

While the Company expects the COVID-19 pandemic and any potential for further, prolonged lockdowns would have a negative impact on its sales revenue, the Company believes it is prudent to make investments to support its strategy to focus on rentals at the onset-of-care. As part of this strategic initiative, the Company plans to invest to expand its physician sales force and to build the infrastructure to enable it to offer physicians the necessary solutions to better serve their patients’ needs. Furthermore, the Company plans to continue to make investments to broaden its portfolio with innovative products and to support its products with expanded clinical evidence. Given such investment initiatives, the Company expects increased operating expense for the year in 2021. In addition, the Company incurred minimal expenses related to bonus and performance-based stock compensation in 2020, and it expects such costs to increase in 2021 along with certain expenses related to the recent CEO transition.

Conference Call

Individuals interested in listening to the conference call today at 1:30pm PT/4:30pm ET may do so by dialing (877) 841-3961 for domestic callers or (201) 689-8589 for international callers. To listen to a live webcast, please visit the Investor Relations section of Inogen’s website at: http://investor.inogen.com/.

A replay of the call will be available beginning February 24, 2021 at 3:30pm PT/6:30pm ET through March 10, 2021. To access the replay, dial (877) 660-6853 or (201) 612-7415 and reference Access Code: 13714750. The webcast will also be available on Inogen’s website for one year following the completion of the call.

Inogen has used, and intends to continue to use, its Investor Relations website, http://investor.inogen.com/, as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. For more information, visit http://investor.inogen.com/.

About Inogen

We are a medical technology company offering innovative respiratory products for use in the homecare setting. We primarily develop, manufacture and market innovative portable oxygen concentrators used to deliver supplemental long-term oxygen therapy to patients suffering from chronic respiratory conditions.

For more information, please visit www.inogen.com.

Cautionary Note Concerning Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, among others, statements regarding the Company’s expectations related to revenue and operating expenses in 2021, the anticipated impact of the COVID-19 pandemic on the Company’s business, including the impact on supply and demand for the Company’s products in its various business channels, the Company’s operating and sales strategy in respect to the COVID-19 pandemic, expectations regarding international sales and tender activity, expectations regarding changes to reimbursement rates, expectations related to the Company’s physician sales force, expectations for the first quarter of 2021 in the Company’s revenue channels, expectations regarding the Company’s stock-based compensation expenses and other compensation expenses, and expectations related to the Company’s rental strategy and growth prospects. Any statements contained in this communication that are not statements of historical fact may be deemed to be forward-looking statements. Words such as “believes,” “anticipates,” “plans,” “expects,” “will,” “intends,” “potential,” “possible,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from currently anticipated results, including but not limited to, risks arising from the possibility that Inogen will not realize anticipated revenue; the risks related to the COVID-19 pandemic; the impact of changes in reimbursement rates and reimbursement and regulatory policies; the possible loss of key employees, customers, or suppliers; risks relating to Inogen’s acquisition of New Aera, Inc. and the integration of New Aera’s business and operations within those of Inogen; risks relating to reimbursement coding of the Tidal Assist© Ventilator (TAV); the possibility that Inogen will not realize anticipated revenue from the technology acquired from New Aera or that expenses and costs will exceed Inogen’s expectations; intellectual property risks if Inogen is unable to secure and maintain patent or other intellectual property protection for the intellectual property used in its products; and intellectual property risks relating to the acquisition of New Aera, including the risk of intellectual property litigation. In addition, Inogen’s business is subject to numerous additional risks and uncertainties, including, among others, risks relating to market acceptance of its products; competition; its sales, marketing and distribution capabilities; its planned sales, marketing, and research and development activities; interruptions or delays in the supply of components or materials for, or manufacturing of, its products; seasonal variations; unanticipated increases in costs or expenses; and risks associated with international operations. Information on these and additional risks, uncertainties, and other information affecting Inogen’s business operating results are contained in its Quarterly Report on Form 10-Q for the period ended September 30, 2020, and in its other filings with the Securities and Exchange Commission. Additional information will also be set forth in Inogen’s Annual Report on Form 10-K for the year ended December 31, 2020, to be filed with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. Inogen disclaims any obligation to update these forward-looking statements except as may be required by law.

Use of Non-GAAP Financial Measures

Inogen has presented certain financial information in accordance with U.S. GAAP and also on a non-GAAP basis for the three and twelve months ended December 31, 2020 and 2019. 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 and other expenses that are not indicative of Inogen’s core operating results. Management uses non-GAAP measures to compare Inogen’s performance relative to forecasts and strategic plans, to benchmark Inogen’s performance externally against competitors, and for certain compensation decisions. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of Inogen’s operating results as reported under U.S. GAAP. Inogen encourages investors to carefully consider its results under U.S. GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. Reconciliations between U.S. GAAP and non-GAAP results are presented in the accompanying tables of this release. For future periods, Inogen is unable to provide a reconciliation of non-GAAP measures without unreasonable effort as a result of the uncertainty regarding, and the potential variability of, the amounts of interest income, interest expense, depreciation and amortization, stock-based compensation, provision for income taxes, and certain other infrequently occurring items, such as acquisition-related costs, that may be incurred in the future.

– Financial Tables Follow –

Consolidated Balance Sheets

(amounts in thousands)

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

2020

 

2019

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

211,962

 

$

198,037

 

Marketable securities

 

 

19,257

 

 

 

11,057

 

Accounts receivable, net

 

 

29,717

 

 

 

34,325

 

Inventories, net

 

 

24,815

 

 

 

35,664

 

Income tax receivable

 

 

2,048

 

 

 

2,976

 

Prepaid expenses and other current assets

 

 

17,898

 

 

 

10,160

 

Total current assets

 

 

305,697

 

 

 

292,219

 

Property and equipment, net

 

 

28,230

 

 

 

19,438

 

Goodwill

 

 

33,165

 

 

 

32,954

 

Intangible assets, net

 

 

68,797

 

 

 

77,533

 

Operating lease right-of-use asset

 

 

8,827

 

 

 

5,855

 

Deferred tax asset – noncurrent

 

 

14,467

 

 

 

14,452

 

Other assets

 

 

2,669

 

 

 

4,888

 

Total assets

 

$

461,852

 

 

$

447,339

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

33,712

 

 

$

30,730

 

Accrued payroll

 

 

7,091

 

 

 

6,215

 

Warranty reserve – current

 

 

5,740

 

 

 

4,923

 

Operating lease liability – current

 

 

1,931

 

 

 

2,014

 

Deferred revenue – current

 

 

6,994

 

 

 

5,478

 

Income tax payable

 

 

1,242

 

 

 

821

 

Total current liabilities

 

 

56,710

 

 

 

50,181

 

Warranty reserve – noncurrent

 

 

8,654

 

 

 

7,648

 

Operating lease liability – noncurrent

 

 

8,078

 

 

 

4,702

 

Earnout liability – noncurrent

 

 

26,940

 

 

 

26,559

 

Deferred revenue – noncurrent

 

 

11,822

 

 

 

13,541

 

Deferred tax liability – noncurrent

 

 

25

 

 

 

87

 

Total liabilities

 

 

112,229

 

 

 

102,718

 

Stockholders’ equity

 

 

 

 

 

 

Common stock

 

 

22

 

 

 

22

 

Additional paid-in capital

 

 

273,521

 

 

 

263,252

 

Retained earnings

 

 

75,605

 

 

 

81,434

 

Accumulated other comprehensive income (loss)

 

 

475

 

 

 

(87

)

Total stockholders’ equity

 

 

349,623

 

 

 

344,621

 

Total liabilities and stockholders’ equity

 

$

461,852

 

 

$

447,339

 

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

(amounts in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Twelve months ended

 

 

December 31,

 

December 31,

 

 

2020

 

2019

 

2020

 

2019

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Sales revenue

 

$

64,628

 

 

$

73,473

 

 

$

280,189

 

 

$

340,546

 

Rental revenue

 

 

9,350

 

 

 

5,444

 

 

 

28,298

 

 

 

21,397

 

Total revenue

 

 

73,978

 

 

 

78,917

 

 

 

308,487

 

 

 

361,943

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales revenue

 

 

35,850

 

 

 

41,908

 

 

 

156,764

 

 

 

175,974

 

Cost of rental revenue, including depreciation of $1,700 and $1,472 for the three months ended and $5,695 and $6,253 for the twelve months ended, respectively

 

 

4,069

 

 

 

3,087

 

 

 

13,543

 

 

 

14,108

 

Total cost of revenue

 

 

39,919

 

 

 

44,995

 

 

 

170,307

 

 

 

190,082

 

Gross profit

 

 

34,059

 

 

 

33,922

 

 

 

138,180

 

 

 

171,861

 

Operating expense

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

3,674

 

 

 

3,628

 

 

 

14,080

 

 

 

9,401

 

Sales and marketing

 

 

25,389

 

 

 

25,544

 

 

 

97,520

 

 

 

105,550

 

General and administrative

 

 

10,518

 

 

 

10,071

 

 

 

38,605

 

 

 

37,121

 

Total operating expense

 

 

39,581

 

 

 

39,243

 

 

 

150,205

 

 

 

152,072

 

Income (loss) from operations

 

 

(5,522

)

 

 

(5,321

)

 

 

(12,025

)

 

 

19,789

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

67

 

 

 

835

 

 

 

909

 

 

 

4,712

 

Other income (expense)

 

 

250

 

 

 

249

 

 

 

5,836

 

 

 

(229

)

Total other income, net

 

 

317

 

 

 

1,084

 

 

 

6,745

 

 

 

4,483

 

Income (loss) before provision (benefit) for income taxes

 

 

(5,205

)

 

 

(4,237

)

 

 

(5,280

)

 

 

24,272

 

Provision (benefit) for income taxes

 

 

(84

)

 

 

(2,862

)

 

 

549

 

 

 

3,322

 

Net income (loss)

 

$

(5,121

)

 

$

(1,375

)

 

$

(5,829

)

 

$

20,950

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

 

452

 

 

 

217

 

 

 

857

 

 

 

(123

)

Change in net unrealized gains (losses) on foreign currency hedging

 

 

(244

)

 

 

(612

)

 

 

(82

)

 

 

(1,566

)

Less: reclassification adjustment for net (gains) losses included in net income

 

 

(140

)

 

 

76

 

 

 

(207

)

 

 

872

 

Total net change in unrealized gains (losses) on foreign currency hedging

 

 

(384

)

 

 

(536

)

 

 

(289

)

 

 

(694

)

Change in net unrealized gains (losses) on marketable securities

 

 

 

 

 

(12

)

 

 

(6

)

 

 

6

 

Total other comprehensive income (loss), net of tax

 

 

68

 

 

 

(331

)

 

 

562

 

 

 

(811

)

Comprehensive income (loss)

 

$

(5,053

)

 

$

(1,706

)

 

$

(5,267

)

 

$

20,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per share attributable to common stockholders (1)

 

$

(0.23

)

 

$

(0.06

)

 

$

(0.27

)

 

$

0.96

 

Diluted net income (loss) per share attributable to common stockholders (1)(2)

 

$

(0.23

)

 

$

(0.06

)

 

$

(0.27

)

 

$

0.94

 

Weighted-average number of shares used in calculating net income (loss) per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic common shares

 

 

22,042,288

 

 

 

21,878,004

 

 

 

21,980,326

 

 

 

21,821,104

 

Diluted common shares

 

 

22,042,288

 

 

 

21,878,004

 

 

 

21,980,326

 

 

 

22,241,064

 

(1)

Reconciliations of net income attributable to common stockholders basic and diluted can be found in Inogen’s Annual Report on Form 10-K to be filed with the Securities and Exchange Commission.

(2)

Due to a net loss for the three and twelve months ended December 31, 2020, and for the three months ended December 31, 2019, diluted loss per share is the same as basic.

Supplemental Financial Information

(unaudited)

(in thousands, except units and patients)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Twelve months ended

 

 

December 31,

 

December 31,

 

 

2020

 

2019

 

2020

 

2019

Revenue by region and category

 

 

 

 

 

 

 

 

 

 

 

 

Business-to-business domestic sales

 

$

24,249

 

$

20,571

 

$

96,423

 

$

106,428

Business-to-business international sales

 

 

13,609

 

 

 

17,101

 

 

 

62,147

 

 

 

77,960

 

Direct-to-consumer domestic sales

 

 

26,770

 

 

 

35,801

 

 

 

121,619

 

 

 

156,158

 

Direct-to-consumer domestic rentals

 

 

9,350

 

 

 

5,444

 

 

 

28,298

 

 

 

21,397

 

Total revenue

 

$

73,978

 

 

$

78,917

 

 

$

308,487

 

 

$

361,943

 

Additional financial measures

 

 

 

 

 

 

 

 

 

 

 

 

Units sold

 

 

40,800

 

 

 

42,600

 

 

 

178,900

 

 

 

201,100

 

Net rental patients as of period-end

 

 

32,200

 

 

 

25,300

 

 

 

32,200

 

 

 

25,300

 

Reconciliation of U.S. GAAP to Other Non-GAAP Financial Measures

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Twelve months ended

 

 

December 31,

 

December 31,

Non-GAAP EBITDA and Adjusted EBITDA

 

2020

 

2019

 

2020

 

2019

Net income (loss)

 

$

(5,121

)

 

$

(1,375

)

 

$

(5,829

)

 

$

20,950

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(67

)

 

 

(835

)

 

 

(909

)

 

 

(4,712

)

Provision (benefit) for income taxes

 

 

(84

)

 

 

(2,862

)

 

 

549

 

 

 

3,322

 

Depreciation and amortization

 

 

4,927

 

 

 

4,618

 

 

 

18,581

 

 

 

13,834

 

EBITDA (non-GAAP)

 

 

(345

)

 

 

(454

)

 

 

12,392

 

 

 

33,394

 

Stock-based compensation

 

 

2,092

 

 

 

2,199

 

 

 

8,203

 

 

 

9,129

 

Change in fair value of earnout liability

 

 

1,219

 

 

 

810

 

 

 

1,053

 

 

 

810

 

Adjusted EBITDA (non-GAAP)

 

$

2,966

 

 

$

2,555

 

 

$

21,648

 

 

$

43,333

 

Contacts

Investor Relations Contact:
Matthew Pigeon

mpigeon@inogen.net

Media Contact:
Byron Myers

805-562-0503

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