Inogen Announces Second Quarter Financial Results

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Second Quarter 2021 Highlights

Domestic direct-to-consumer revenue of $40.9 million, up 35.6% from the same period in 2020

Cash, cash equivalents, and marketable securities were $250.0 million with no debt outstanding as of June 30, 2021

Rental revenue of $11.3 million, up 85.2% from the same period in 2020

Story Highlights

  • GOLETA, Calif., August 04, 2021–(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 months ended June 30, 2021.

  • Total revenue of $101.6 million, up 41.7% from the same period in 2020, primarily due to strong consumer demand, improved average selling prices in all channels, and reduced COVID-19 pandemic-related impacts

“We saw strong revenue growth of 41.7% as compared to the second quarter of 2020, when the COVID-19 pandemic drove a significant negative impact on our business,” said Inogen’s President and Chief Executive Officer, Nabil Shabshab. “We are pleased with the recovery in our core business. Demand and average selling prices for portable oxygen concentrators increased primarily due to higher consumer confidence and higher COVID-19 vaccination rates leading to increased patient ambulation in the second quarter of 2021. While we are confident in the underlying strength of our business, we are navigating rising costs and supply chain constraints like many companies across the globe. The semiconductor chip shortage is impacting our ability to supply our customers with batteries and portable oxygen concentrators. As a result, we expect revenue growth constraints and a higher cost of goods sold per unit starting in the third quarter of 2021 versus the first half of 2021 until chip availability increases.”

Second Quarter 2021 Financial Results

Total revenue for the three months ended June 30, 2021 increased 41.7% to $101.6 million from $71.7 million in the same period in 2020. Overall demand and average selling prices for the Company’s products was strong in the second quarter of 2021. However, due to supply chain constraints and in an effort to optimize financial results, the Company focused supply capacity on its direct-to-consumer and international business-to-business sales channels. Story continues

Domestic business-to-business sales in the second quarter of 2021 increased 27.8% to $27.6 million compared to $21.6 million in the second quarter of 2020. The Company believes this increase in the second quarter of 2021 was primarily due to greater demand for portable oxygen concentrators (POCs) for both traditional long-term oxygen therapy patients and secondarily due to COVID-19 patients upon hospital discharge as well as higher reseller demand. International business-to-business sales in the second quarter of 2021 increased by 57.3% (47.8% increase on a constant currency basis – see accompanying table for reconciliation of GAAP and non-GAAP measures) to $21.8 million compared to $13.9 million in the second quarter of 2020. The Company believes the increase was primarily driven by improving COVID-19 vaccination rates and increased ambulation of patients in Europe, increased operational capacity of certain European respiratory assessment centers, and increased sales in India associated with the spike in COVID-19 cases in that market. International business-to-business sales in the second quarter of 2021 included $2.0 million in sales to the Company’s distributor in India versus no sales in the second quarter of 2020.

Direct-to-consumer domestic sales increased 35.6% to $40.9 million in the second quarter of 2021 from $30.2 million in the second quarter of 2020. The Company believes the increase was primarily driven by increased demand for POCs due to higher COVID-19 vaccination rates within the Company’s patient population and the relaxation of closure orders related to the COVID-19 public health emergency (PHE) leading to increased ambulation, as well as improved consumer confidence. This increased demand was partially offset by lower average inside sales representative headcount, which was down approximately 18% from the comparative period as attrition outpaced hiring, primarily due to increased competition for sales professionals in 2021, along with reduced hiring of new sales representatives in 2020 due to the COVID-19 pandemic. Rental revenue in the second quarter of 2021 increased 85.2% to $11.3 million from $6.1 million in the same period in 2020, primarily due to increased patients on service, higher billable patients as a percent of total patients on service, and higher Medicare reimbursement rates. As of June 30, 2021, the Company had approximately 37,100 patients on service, which was up 6.9% sequentially compared to March 31, 2021, and up 40.5% compared to June 30, 2020. The increase in patients on service was primarily driven by greater utilization of leads for rental opportunities and physician facing initiatives to increase prescriber awareness by the Company’s sales force as well as the relaxed Medicare criteria for oxygen therapy reimbursement due to the COVID-19 PHE.

Research and development expense increased to $4.1 million in the second quarter of 2021, compared to $3.3 million in the second quarter of 2020, primarily associated with increased personnel-related expense. Sales and marketing expense increased to $29.3 million in the second quarter of 2021 versus $22.1 million in the comparative period of 2020, primarily due to increased personnel-related expense, advertising costs, and other direct-to-consumer sales and marketing costs. Media and advertising costs were $8.7 million in the second quarter of 2021 compared to $7.2 million in the second quarter of 2020. General and administrative expense decreased to $5.2 million in the second quarter of 2021 versus $9.7 million in the second quarter of 2020, primarily due to a $9.0 million decrease in the change in the fair value of the New Aera earnout liability and lower consulting costs, partially offset by increased personnel-related expense including $0.8 million in officer transition costs. The change in the fair value of the New Aera earnout liability was a benefit of $8.1 million in the second quarter of 2021 compared to an expense of $0.9 million in the second quarter of 2020. The reduction in the fair value of the earnout liability in the second quarter of 2021 was associated with the reduced expected revenue from the TAV technology due to the negative Medicare reimbursement coding outlook based on the recent court decision to dismiss the Company’s legal case against CMS with regards to non-invasive ventilation coding. In the second quarter of 2021, the Company reported operating income of $11.7 million, Adjusted EBITDA of $12.4 million, net income of $5.1 million, and earnings per diluted common share of $0.22 (see accompanying table for reconciliation of GAAP and non-GAAP measures).

Total operating expense increased to $38.7 million in the second quarter of 2021 versus $35.1 million in the second quarter of 2020, primarily due to increased personnel-related expense and increased media and advertising costs. These increases were partially offset by a $9.0 million decrease in the change in fair value of the New Aera earnout liability (non-cash) versus the comparative period. Total gross margin was 49.6% in the second quarter of 2021 versus 45.7% in the comparative period in 2020. Sales revenue gross margin increased to 48.4% in the second quarter of 2021 versus 45.0% in the second quarter of 2020, primarily due to increased mix of domestic direct-to-consumer sales, which have a higher gross margin versus the Company’s business-to-business sales, and improved average selling prices in all channels. The increase was partially offset by higher cost of goods sold per unit in the quarter, primarily due to increased labor and overhead costs and material costs. Rental revenue gross margin increased to 58.6% in the second quarter of 2021 versus 53.0% in the second quarter of 2020, primarily due to higher billable patients as a percent of total patients on service and higher Medicare reimbursement rates, partially offset by higher service and depreciation expense per patient on service.