Inogen at Needham Conference: Strategic Growth Amid Challenges

On Tuesday, 08 April 2025, Inogen Inc (NASDAQ: INGN) presented at the 24th Annual Needham Virtual Healthcare Conference, offering insights into its strategic direction. The company highlighted its turnaround progress and future growth plans, while acknowledging challenges in direct-to-consumer sales and gross margins. The leadership emphasized commitment to profitability and innovation.

Key Takeaways

• Inogen aims for 5% to 6% revenue growth in 2025, with adjusted EBITDA breakeven as a target.
• The company is focusing on product diversification and entering the Chinese market.
• Operational changes include ending costly agreements and rightsizing channels.
• A robust supply chain strategy is in place, with no significant impact expected from tariffs.

Financial Results

• Revenue growth for 2025 is projected at 5% to 6%.
• Gross margins are expected to decrease to 43% to 45% this year, down from 46% last year.
• Operating expenses reduced from $236 million in 2023 to $197 million in 2024.
• The company targets adjusted EBITDA breakeven by 2025, representing a $9 million improvement.

Operational Updates

• Leadership has been solidified with key changes to enhance capabilities.
• The third-party rental agreement was ended to cut costs.
• Direct-to-consumer channel was resized for better contribution margins.
• The company plans to launch stationary concentrators in China by 2026.
• Collaborations with UL have added $27 million to the balance sheet for operational and R&D initiatives.

Future Outlook

• Inogen aims for double-digit growth through new products and strategic partnerships.
• Plans to launch new products focusing on digital health and connected components in POCs.
• Entering the Chinese market with premium portable oxygen concentrators.
• The Rove four and Rogue six models offer enhanced features with extended battery life.

Q&A Highlights

• Inogen is in the "third inning" of its turnaround, focusing on foundational improvements.
• Direct-to-consumer sales are expected to improve in the latter half of the year.
• The rental business faces challenges from a shift to private payers.
• Strong growth in B2B sales is driven by patient preference for portable oxygen concentrators over tanks.

Readers are encouraged to refer to the full transcript for a detailed understanding of Inogen's strategic plans and financial outlook.

Full transcript - 24th Annual Needham Virtual Healthcare Conference:

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Good morning. Thanks for joining us at the twenty fourth Annual Needham Healthcare Conference. I'm Mike Matson, and I'm lead of the med tech equity research team at Needham and Company. I'm pleased to introduce Inogen. Presenting from Inogen today, we have President and CEO, Kevin Smith and CFO, Michael Borg.

Instead of a standard presentation, we're going to do a Q and A session or fireside chat. If you have any questions you'd like to ask, you can submit them electronically through the Needham conference website. You can also email them to me at mbatson@neomco.com, and I'll do my best to fit them in. So thanks, Kevin and Mike, for joining us. We're gonna just dive right into the the q and a here.

So I wanna start a higher level question here, Kevin. You've been at Inogen now for over a year. I know that you've made quite a bit of progress with the turnaround, but I wanted to see if you could just give us an update, you know, at this point in time, what you've done since you joined and kind of compare Inogen's position to where it was when you joined and where it is now.

Kevin Smith, President and CEO, Inogen: Sure. Thanks, Mike, and I appreciate you inviting us here. Thank you. So if we look over the past year, I really think the most important change that we've been able to make is solidifying our leadership team. We've made a lot of changes to that leadership team over the over the year, and I believe we've got the right people in place with the right capabilities to take us into the future.

We've also made some changes to our sales organization. We ended the third party external sales sales party that agreement that we had in place that was in a rental channel, so we reduced the expenses associated with that with were not weren't contributing positive results to the organization. That enabled us to to bring, you know, more talented salespeople directly under our control, not be the third party relationship, and and focus on getting the rental piece back to the profitability that was specific to that chain. We right sized our DTC channel. We talked this last year about rebaselining the DTC.

We completed that in the second half of the year. That's enabled us to get to the to the right contribution that we wanted coming from that organization and positioning ourselves to return to profitable growth in not just in DTC, but certainly throughout the rest of the the company. And, you know, over the course of this last year, we also returned to growth. We made great strides. We did approach adjusted EBITDA profitability.

And to that end, we've also guided to a 6% growth at the top end of our range in 2025. And we also expect to approach adjusted EBITDA breakeven. So I think we're making we've made the right strides. We've put the right pieces in place to position ourselves for the future.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay, thanks. And then just in terms of what your expectations were when you joined Inogen and what you've seen in the past year plus since you've been there, Maybe just talk about what's been better, what's been worse than what you kind of expected going in.

Kevin Smith, President and CEO, Inogen: Yeah. And I think one of the positive things that I've seen since joining here, Mike, is the passion that we have throughout the organization. And that is key. We have people that are absolutely dedicated to our patients, dedicated to our mission and what we're doing with our patient population. We have people that have joined, intentionally joined Inogen because they had family members that have respiratory disease and have seen the benefits of of Inogen's POC, and that passion shows throughout the throughout the team.

And then we've also opened up the silos that were that were here in the past. We have bottoms up forecasting. We have we have ideas. We have change management, things that are happening that are coming throughout the organization, not just from the from the top down. And and so there's the yeah.

That's some of the changes that we've seen, but also that positivity that that I would say is a little bit of a a pleasant surprise, but that passion is incredible.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Got it. And then to use the baseball analogy, you know, what inning do you think we're in in terms of the the turnaround now?

Kevin Smith, President and CEO, Inogen: Yeah. So interesting analogy. So well, you know, we've taken a lot of a lot of action. We put the time in here over the last year to do some of the foundational work that that needs to happen. We've seen some positive results with our financials.

You've seen that through our communication that we've had over the quarters here. But I would say that we're in still in those early stages, so I'd put us in the third inning, you know, right now is focusing on the turnaround. Because even though we have the the foundation that's in place, you're starting to see that positive momentum come through, This is a turnaround, yes, but it's also repositioning ourselves for the future. We have a great foundational product, which is the Inogen POC. We have a strong brand name.

We have the ability to execute going forward. We've been seeing some of those. When you think about the transformation and expanding the pipeline and turning Inogen more from a single product company into a respiratory care company that ultimately in the future has connected devices and digital health components to it, That's exciting, but that's still in the early stages here right now. We see some of that throughput coming, but I'd say third inning. But we do have the right people on the field and feel confident in the team.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Great. I think you sort of already answered some of my next question, but I'll go ahead and ask it anyway. So what's on your to do list in terms of, you know, next steps and the turnaround?

Kevin Smith, President and CEO, Inogen: Yeah. So if I'm looking in the in the near term here right now, you're focusing on that Semiox reimbursement. We have the five ten k, but we need to get the the reimbursement in place. That takes time. That takes effort working through private insurers as well as the through the CMS process.

But getting through that process is is is high on the to do list, as well as rolling out the stationary concentrators that we are bringing in and rebranding from from UL that we announced earlier in this year. Executing on that is key, as well as finishing up the rollout of one of the pilot programs that we have with the patient first program in our DTC channel, then coming to a conclusion on our hospital pilot and making decision go no go amount.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Got it. And that also leads well into my next topic, which is on the diversification efforts to kind of broaden your product offerings. So in January, you announced this collaboration with the Chinese company, UL. You just referred to that.

I was wondering if you'd start out by giving us kind of an overview of the agreement and what it means for Inogen.

Kevin Smith, President and CEO, Inogen: Certainly. We see this opportunity as a way for us to accelerate our growth and profitability over time. So shortening that that curve to getting us to to, you know, positive sustainable profitability as well as getting us back to double digit growth in the future. So the way that this is going to contribute to that is really three separate agreements that we have with UL here. The first is expanding our pipeline as a distribution agreement.

So we will be bringing, as I mentioned there, the stationary concentrators in. We feel very confident in the quality of these stationary concentrators, bringing that into our pipeline branded as Inogen, supported as Inogen, maintained by Inogen, and being able to expand our reach and our pretty much through the existing sales channels that we have today. We also have that ability now through through our partnership with UWell to open up a the Chinese market, which is a large vast opportunity for us in affordable concentrators, bringing our POCs in as the premium product in a growing market and with many patients that are suffering from COPD in China. And that is all new business for us. We don't have any market today in China.

No access to the market today as we work through that. But then the other part of this agreement or one of the other agreements there is collaboration where we are going to work together putting our expertise. We have expertise in portable oxygen concentrators. They have expertise in other areas of respiratory care, working together on new innovations for the future, opportunities for Inogen to expand our pipeline and and again achieve long term sustainable profitable growth. But then the last part there was a stake in the organization.

So UL had had acquired 9.9% ownership stake. That gave us $27,000,000 to put on the balance sheet, dry powder to be able to utilize for operational initiatives as well as R and D. And that's again an exciting opportunity for us.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. And then just out of curiosity, we've had a lot of news on the tariff situation. I don't want to get into I'm going to get into, like, tariffs more broadly later, but I'm just specifically asking now about tariffs with China, you know, the kind of back and forth. Because I guess now, you know, there's gonna be a tariff on imports into The US, but it looks like they're gonna be tariffing some of our products, US products going into China. Do you have any idea whether that would apply to your products since they're medical products and how this you know, whether this what this would be kind of for the the the cost of these products, assuming that these things remain in effect that is?

Kevin Smith, President and CEO, Inogen: Yeah. So as they as they're written today, we don't believe there's any material impact on us. And I think the other thing to to keep in mind is, especially when we're looking at if we're looking at this more broadly, and I know I might be getting a little bit ahead here, Mike, but the

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Yeah.

Kevin Smith, President and CEO, Inogen: You know, we have manufacturing in Plano, Texas for the for The US and select international markets. We have a manufacturing partner in The Czech Republic for European partners and and and elsewhere. And with the partnership with UL, our intent is not to to have UL manufacturing our POCs. It's certainly not for export. There's a potential there, though, to be able to take advantage of that relationship specifically for the Chinese market.

So I believe we're in a really good position, we have the right partner to to make sure that we have minimal, if any, impact.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Alright. And then, you know, just from a timing perspective, you know, in terms of, you know, both directions, so when would you expect to start selling, you know, their their concentrators in The US and then, you know, vice versa, you expect to start selling your POCs in China.

Kevin Smith, President and CEO, Inogen: So with the stationary concentrators, we are in the process of rebranding and making some minor adjustments to the stationary concentrators. We expect to start being able to sell those in the second half of the year. Although the material impact on that, the positive uplift would be more of a 2026 event than it will be a 2025 event because we to get customers in the pipeline, work through the ordering process to get that business closed and do the evaluations that are necessary. But this will be more of a 2026 uplift than it will be a '25 uplift. Then on the other side with our POCs going into into China, they are gonna be still branded as Inogen premium products in China, but we have to work through the regulatory process there.

That takes some time. That'll be in '26 is what we're targeting to be able to launch in China.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Got it. And then let's see. Just maybe Chinese oxygen market. Can you just talk briefly about that?

I think it's more I'm not sure that there really is is a covered product by insurance or government over there, so it's more of out of pocket. Is that correct? And maybe just talk about the size of the market and opportunity.

Kevin Smith, President and CEO, Inogen: Certainly. And it it is a out of pockets pay in China, but as a to give you an idea, so UL sells approximately a million stationary concentrators for cash in China each year. That is a that is a sizable market that is just cash pay. That's for the stationary concentrators. The portable concentrator market in China is also going to be

The way that they sell directly to patients in China, similar to our DTC but a little bit different. It's a bit easier in that it doesn't require a physician's prescription. So that makes that process more simple and less back office support is needed to be able to get sales and manage these patients. The other side of that is they do direct advertising almost like a QVC type sales for medical devices They own the channels.

They put a lot of respiratory care products through there. We will be through them, we will be showcasing the Inogen product after we have regulation approval and are entering the market. But when you think about this, there are early stages of portable oxygen concentrator in that market. It's primarily stationary concentrators, and so we're gonna be building that up. And this is the this is the right time for us to be able to get in there and position Inogen as the as the premium brand in the Chinese market.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Got it. And then I wanted to move on to talk about the other diversification effort with Symbioc. So you're gonna talk a little bit about that. But just wondering if you could start out by giving us a quick overview of the product for people that maybe aren't as familiar with it, kind of, you know, where it's used in the market opportunity there.

Kevin Smith, President and CEO, Inogen: Certainly. The so when you look at at Symiox, it's it's a lightweight. It's transportable, but it's airway clearance. An airway clearance device to remove bronchial mucus from the patients who have chronic lung disease, it could be patients that have COPD, cystic fibrosis, bronchiectasis. The other modalities that are available out there for airway clearance are oftentimes either ineffective or bulky and cumbersome to be able to use.

This is a very elegant effective way to help patients. When you think about the opportunity and what the sizing of this market would be in The United States, you've got about fifteen million patients that have between stage two and stage four COPD. And when you look at bronchiectasis as a specific category within that, there's some overlap, not all of it is overlapping, but we believe it's very much an undiagnosed disease as is reported in publications and studies that come from around the world. And the market appears to be about a seven to eight million range within that stage two to stage four patient population overlapping with COPD. So the opportunity here is to utilize our existing sales channel.

We aren't going to need to invest in a new commercial organization. We have the direct to patients. We have the rental, which is calling on the prescribers to create need and awareness. And once we have the reimbursement in place, then it will be an attractive option for HME B2B partner.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Got it. And then just maybe talk a little bit about you can start getting into this, I think, with the the launch and and the the reimbursement strategy with with this product and, like, timing of when you could potentially get some Medicare coverage for it.

Kevin Smith, President and CEO, Inogen: Sure. So within each of these channels, we're gonna start off with this in our DTC because this will initially be cash pay as we're working towards the reimbursement. We'll work towards the private reimbursement, then we'll work towards the towards Medicare reimbursement. Those will be somewhat in parallel, but they take time. But it also is worthy to note that it's a razor razor blade model.

We have the capital components that will be the the semiox itself, the box. We also have the disposable components, so there'll be a monthly disposable that goes with it. There's an RFID, so it needs to be changed out on a monthly basis. That's a that's an opportunity for us to now have those disposed of the sales, which we have very little of today at at Innogy. So the strategy to go to market is initially through the DTC channel, utilizing some of the prescriber network to be able to create awareness with the physicians.

And then as we work through then that'll be into the and potentially into that b to b channel. And you'd asked about the timing on that. The timing is going to when you think about CMS, and it's a it'll be a little bit forward with the private pay. But with CMS, you have two times during the year to be able to file for that. You have a January and then you have a July, opportunity.

We anticipate being able to, to get the necessary, details done, clinical work to, to support it, to submit in 2026, although we're not really guiding it when we expect to be able to submit in 2026. There have been some changes at CMS. There's been a lot of people that have left, there's a bit of an unknown as to what that will mean for timeline impact. But we see being able to file on that set.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Yes. Okay. All right. So I want to move on to supply chain. So again, I know the tariff situation could change things, but at least up until these things get sort of implemented here.

Can you just give us an update on your supply chain? I think it's mainly improved or kind of stabilized from where things were a few years ago coming out of the pandemic. And then I guess the secondary question, maybe this is more for Mike, but have you worked through all the higher cost inventory that from those spot buys and stuff of semiconductors that you had to do

Michael Borg, CFO, Inogen: a few years ago? Yeah. Thanks, Mike. I'll take the I'll take those questions. First of all, in terms of our supply chain, you know, we're really comfortable.

We think we're in a really good place with it. We've had no problem sourcing materials or components. We don't foresee that changing. We did talk a little about tariffs. Kevin talked about that earlier, and again, I'll reiterate that as a detail today.

We don't see them having a material impact on our business, but, of course, it's very fluid. So we'll continue to monitor that, and we'll act accordingly. As Kevin also mentioned, you know, we we have manufacturing in in The US and Plano, Texas. We also have manufacturing in The Czech Republic, so we believe those two those things help us, you know, really mitigate risk pretty well. In turning in terms of your question about the the cost on the balance sheet or premium cost, we have worked through most of those.

I think we talked about it in last year quite a bit when we were looking at gross margins year over year and the impact that they had in 2023. We do have a little bit of of those premiums on the balance sheet that we expect to work through in 2025, which was which was baked into our guidance. And as I mentioned in our in our call q four call, our earnings call, less than a hundred basis points impact, you know, but we'll work through those during the course of of 2025, but again, not a significant impact to us.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. And then just as a follow-up to your commentary on the the tariff stuff. So, you know, I know you have the plant, as you said, in Plano and Czech Republic, but the or I guess I should say plants. But the what about your kind of supply chain and, you know, raw materials or components? I mean, how is there exposure there to those things that are, you know, any of those coming from, you know, outside The US or that you where you can see some cost pressures or or not from the tariffs, like semiconductors and things like that?

Michael Borg, CFO, Inogen: Yeah. I guess I'll I'll start with that when Kevin can jump in. You know, so we we've been working pretty hard over the last year or so just on second sourcing initiatives, things like that with our supply chain and try to you know, it does a couple things. Right? It it gives us a little bit of a diversification depending on where we're getting where we're sourcing that from.

It also gives us an ability to really work with vendors and leverage, you know, one against the other in some cases and get better pricing. We've seen that, actually. We've gotten some benefit of that. We'll see some of that benefit run through 2025, but and we'll continue to work on those things. But, again, you know, as we looked at the tariffs in general and I'll just say again that, you know, right now, you know, look at this as everybody knows how fluid this is.

It changes. It changes daily almost, so we'll continue to monitor it. But as as it stands right now, we don't see a material impact to our business. But, you know, of course, like everyone else, we'll continue to monitor that. I don't know if, Kevin, if you wanna add anything.

Kevin Smith, President and CEO, Inogen: Yeah. I think the only thing I'll add is also on the the logistics with with getting those materials to the to the both Plano, Texas as well as to The Czech Republic. One of the things that we've been able to put in place and avoid is, for example, for The Czech Republic producing for Europe is to have our supply chain directly shipping into into that location so it doesn't have to pass through the through The And be hit with potential tariffs there. So that does help us reduce our exposure.

And we think the way that we've managed all of this and set it up through the last year, this may give us an advantage in the future over competition. So especially when you think about products coming in directly from China, wholly assembled and so forth, there's a you know, it is fluid as Mike had indicated, but but we believe this gives us an advantage.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Yeah. I mean, that that's a really good point, I guess, on the competition. So just, you know, in the POC space specifically, I mean, do you have a feel for, like, how many of how many of the competitors are are, you know, coming from outside of The US, China, or somewhere else? Is it most of those products, or are there any others that are kind of built in The US like you guys?

Kevin Smith, President and CEO, Inogen: Yeah. So it's a it's a fair question. I don't wanna necessarily quantify that, but I what I would say is that the you know, where we do see the price pressure coming in the in the market is from is from Chinese products that come in at a very low cost, arguably low quality. They don't have the eight year useful life that we do. They do not have the local support.

They do not have the advantages that Enogen is able to add to that. But this is but there are certainly products that are coming in off the boat from China that would go directly to a B2B for example. And so this may give us an advantage.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Got it. All right. And then just you have launched some new products as well in the POC space. So I think row four and row six.

Just wondering if you could give us an update on how those are doing and, you know, just remind us of when they were launched.

Kevin Smith, President and CEO, Inogen: Certainly. So we've got the the Rove four, which was launched in last year. So we brought that in late last year, the which is our newest one, the Rove six in the in the year prior. Those are our two flagship POCs right now. They had replaced the G4 and had replaced the G5.

The Rope four is the target on this one are patients who are little bit earlier in their disease state, patients who are highly mobile but need to have oxygen when they're active, when they're out and living their lives. The Rogue six is for patients that are a little bit more advanced, still have the mobility, they don't want to drag the oxygen tanks around with them when they're moving, they still want lightweight, they want long life. The Rove four weighs, that's a 2.9 pounds POC, six hours of battery life, which, of course, can be extended with additional batteries, plug it in to recharge on the, on the go into, into your car or what, or what have you. The Rogue six, six settings, 4.8 pounds, thirteen hours. But one of the, one of the really interesting things here with the Rogue four, we have people that run marathons running marathons, excuse me, with a, you know, somewhat of a of a small backpack, that's in.

It's like a hip pack that we have. So super lightweight, enables mobility even extending to a marathon.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Got it. And then just in terms of the pipeline there, I mean, in in POC specifically, you know, is there anything that we will see being launched in the next year or two?

Kevin Smith, President and CEO, Inogen: So we haven't announced any launches that are coming up. We are continuing to focus on extending our our pipeline and maintaining competitive advantages there. But one of the things that we have been putting out and we have been hinting towards is also focusing on the connected components of that, the digital health aspects. And and we do have some some additional launches that we'll be that we'll be talking to you later this year.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: And, yeah, I mean, I've I've heard you guys talk about that. So one question there would be on that connectivity feature. I mean, that mainly like a a software upgrade? Is that something that's, you know, could be backwards compatible with some of the, you know, later like the Rove four and Rove six, the newer POCs

Kevin Smith, President and CEO, Inogen: that

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: you can put out there, or is it something where the customers would have to buy, like, know, it's only going to be on, you know, production from a certain point going forward?

Kevin Smith, President and CEO, Inogen: So it is something that's backwards compatible. We do have the on on the Rogue 4s and the Rogue 6s that we're selling, even going back to the to the G5s. We do have connected components that are in there. We have Bluetooth capability in which we could connect to the to the devices. It enables us to to have better communication with the parents, the patients.

It allows the patients to be able to see the status of their device more effectively. It allows them we have portals for the patients to be able to go online, order accessories, engage with the people at Inogen. So it gives us that that more closeness, but it is also setting us up for futures that I won't necessarily get into now. But from a b to b standpoint, it also enables them to do troubleshooting on devices remotely, reducing the expense to if they have to get a device back from the field. If it's something that is simple, they can just send the can send, for example, a column replacement to a patient that they can install themselves rather than having to to pick it up and and do a replacement.

So so that enables them to have better week managements and can also reduce the cost, which also sets us up as a better partner.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Got it. So now I wanna ask some questions on some of your kind of business categories. So you're starting with DTC rentals. You know, the rentals business prior to, I think, when you joined the company had gone through a period of pretty strong growth, but that's kind of slowed down.

And I think more recently, it's been declining. So can you maybe just talk about what's happened there? And, I mean, is this can you get this part of the company back to growth? And, you know, how are you gonna do that?

Kevin Smith, President and CEO, Inogen: Mike, do you wanna start with this one, or do you want me to start?

Michael Borg, CFO, Inogen: I'll I'll be happy to, Kevin. So so, Mike, there's a couple of trends in the rental channel that have had a negative impact. First of all, you may recall we we we exited a third party prescriber agreement, partnership we had, brought that in house. That's that's led to some short term impacts on sales, but it's provided us a lot more flexibility, greater control over the relationships that we have in that channel. I know Kevin could probably add to that in a moment, but I'll first talk about the second item that's had an impact to that business.

We've talked about this a little bit in the past. It's really a mix shift from Medicare to private payers. So our our our our our patients being serviced, we're seeing that more and more of them are going to private pay from Medicare. Medicare has a higher monthly reimbursement. So as you're looking at that impact, you know, the the patients, if they're the same patients, but there's they're switching more towards a private pay, we're getting less revenue.

We're servicing those patients at the same cost, so there's an impact to gross margin as well. So we've been seeing that trend over the past, say, five quarters. But an important distinction from that, I think it's important that's gonna serve us well going into the future, is that, unlike Medicare patients, the private pay, patients do not get, capped, you know, capped at thirty six months. So now what we're seeing that if we were at Medicare patients at thirty six months, assuming the patient continues to be on service, that we don't get a reimbursement. We continue to serve that patient.

Under private pay, we'll continue to get that reimbursement. So that'll be something that'll benefit us in the future. And I'll let Kevin talk a little more and think about that prescriber channel.

Kevin Smith, President and CEO, Inogen: Yeah. Certainly. So this this goes back to that that third party that we had exited. So it was it was expensive. We didn't see that as contributing profitably to the organization.

We downsized that that group by exiting that's that relationship, and we brought in via the best reps from that group directly in house. It's smaller. It's a more focused it's a more focused team, but that is and that's something we've been focusing on on doing the right things, controlling that sales channel, and building that up for, yeah, with profitability. We also see that as calling on the prescribers as an important step when we're launching the Symioxx because it is the same prescribers. This team is directly in front of these physicians that can help build awareness and demand for that future.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Thanks. And then just, Mike, sorry. The when you say private pay, is that essentially that the patients are moving from, straight out Medicare to, like, Medicare Advantage plan or something like that, or is it something else, like younger

Michael Borg, CFO, Inogen: Yeah. That's that's a big part of it. Okay. That so it's it the Medicare Advantage would be inclusive in private pay, so it would be inclusive of whether moving to, like, a private pay insurance or a Medicare Advantage.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Alright. And then just moving on to DTC sales. So, you know, Kevin, I think you said earlier in the call that you you'd, you know, reduce the the sales headcount there. So I understand that that's kind of, you know, creating some headwinds in that business.

But maybe you could just talk about kind of where things stand with DTC sales and, you know, when you expect, you know, things to stabilize there. I think you probably lap those headcount reductions mid middle of this year or something like that. Is that right?

Kevin Smith, President and CEO, Inogen: That that's right. That's right. We see this team as we have it now stabilized going forward, but it would be an unfavorable comparison when you think of that headcount on this first half of the year. So the second half of the year will be a more favorable year on year comparison with the people and the team that we have in place. We are through that organization completing the rollouts in the first half of this year of that Patient First initiative.

And as a reminder what that is, is when a patient calls and wants to have an Inogen, we would focus that team historically on cash sales. And if that patient was not right for a cash sale purchase of an Inogen, they would then transfer over to another group who would come back, try to reconnect with the patients and explore insurance opportunities. And as you can imagine, we lost a lot of contact with patients in that type of a handoff. And so and those are missed opportunities for us. So what we are doing today is we have the right incentives and the right training in place, and we're rolling out that training process to have the to have our sales organization focus on what's best for the patient the first time that they call.

So exploring both cash options as well as insurance coverage options, training them on how to evaluate patients for insurance coverage, and we see that as an opportunity to to help us grow. The rental patients are the month to month covered by insurance. The cash sales, of course, is is all a fund. But also within that channel, Mike, will be in the second half of the year as the opportunity to be able to bring in that that new Inogen branded stationary concentrator as a lower cost option versus Energen at home device that we have, which is very premium priced, very specific patient population, but allows us to extend that opportunity for other patients.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Got it. And then moving on to the B2B business, I mean, in contrast to the DGC side, this has seen some really strong growth. So maybe you could just give us an update on this business and kind of what you're seeing from the customers, particularly some of the larger regional national regional HME companies. Are they we just did a survey.

It looks like they're continuing to transition from tanks to, you know, to to POCs. I mean, are you seeing that? And, you know, kind of is it, you know, accelerating at all? Or

Kevin Smith, President and CEO, Inogen: That that is what we've been seeing as well. And that that for us is is opportunity. The the larger opportunity for Energen and the portable concentrator market for the future is is is not a competitive which device, you know, us versus the competitive POC, but it's it's the POC versus the tank. And and as we see the b to b partners shifting more towards the portable concentrators, driven by a couple of things. It's driven by one, the patient specifically asking for a POC.

And when they do ask, they ask for an antigen. So that is the you know, that is a good value in the advertising that we continue to do and the brand awareness that we continue to create. But that's an opportunity to to gain more b to b business in the future. The only other option, of course, is the tanks that the HMEs traditionally provide patients. And they have an investment that's in there.

They have to work through getting those off of the books. But what we're continuing here is more of a desire to go to the POCs for the patients in in the future. So we're seeing that happening. That's one of the reasons why we're also focused on digital health offerings to support our b to b partners and continue to set us up as the other product mature.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Got it. So now I wanna move on to some financial questions. So I guess, you know, your guidance, as you mentioned earlier, implies kind of 5% to 6% growth for this year. You grew 6% last year.

So should we think about Inogen as a mid single digit growth company? And you mentioned kind of aspiring to double digits. So what's it going to take to get to double digits growth?

Michael Borg, CFO, Inogen: Yeah. So I would start off, Mike, by saying we don't categorize ourselves as a mid single digit growth company. It's certainly not a goal you know, our goal. We've talked a lot about the UL collaboration representing really huge opportunity for us to, to accelerate that timeline to, to double digit, revenue growth. We also talked about that taking, you know, kind of a multiyear process.

So this year, we do expect to have some some revenue from that transaction, but it it's not expected to be significant. But we do, you know, we do look at that as as a as a huge impact, and and and we're excited about where we think we can be with it. In terms of kinda taking that to the next level, you know, certainly the UL collaboration even beyond the expectation issue of the SOC has a lot of products in there we can analyze and look at and determine which ones we we think are gonna fit our our, you know, portfolio that we're building. We also believe the Semiox commercialization, Kevin talked about a little bit earlier, and the additional digital offerings are gonna all help us get to that point and help us sustain that in the future. But at this point, you know, as we said, we've, you know, we've kinda given the

We haven't gotten into too much beyond that, but we're really excited about those things getting helping us get there.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Okay. Got it. And then just looking at gross margin, you guided to, I think, 43% to 45%. That's down a little from last year. I think you're at 20 sorry, 46%.

And to be fair, I know you're expecting improving EBITDA. But just in terms of gross margin EBITDA margins, that is but just in terms of, you know, your gross margins, I guess, why why is it down a little? I know there there's a lot of moving parts here because between mix and things like that. But

Michael Borg, CFO, Inogen: Sure. So, yeah, Mike, that's right. And and as I think I mentioned in our our q four call that in 2024, we had a onetime positive adjustment about 50 basis points to the full year gross margin. So, you know, if you're kinda looking at that and say, you know, start if you wanna start with with 24 as a baseline, you kinda look at that kind of 50 basis points impact. I talked earlier about some of the headwinds that we we have, some of that being the premium still on the balance sheet that we're gonna cost out this year.

Again, those are one time in nature as well. Those won't repeat. And then, you know, you mentioned the the b to b business. Right? So the b to b is what's driving our growth.

So clearly, ASPs are lower when we're selling volume like that. So that is a, you know, a challenge to our gross margin. We also have the other side of that, which is some initiatives we're looking at, and and we have some of those built into our our guidance in terms of favorability to help drive down our cost per unit. And we'll see, hopefully, more of those as the year goes on and we can get these initiatives executed. But I think it's an important, to kinda talk a little bit about, you know, when you look when we're looking at this business and and we're looking at, you know, b to b business in in '24 and '25 driving that growth at the at the lower gross margin percentages impacting our gross margin.

It's important to note that, you know, we're we're accelerating that growth without significant incremental cost. Right? So that's why we're seeing a lot more gross profit drawers drop down. And that's why we're looking at in 2024, for example, we improved our profitability by almost, almost $30,000,000. And then we guided to approaching adjusted EBITDA neutral in 2025, which is about another $9,000,000 improvement.

So that's a big thing that I think is important to to note that, you know, gross margins will be challenged when we do more more b two b. You know, but on the bottom line is is we're getting to, accelerating that growth to profitability.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Yes. Okay. And then just as a final question that leads into my next question, which is on OpEx. So operating expenses have come down significantly. Now I mean, I'm looking at things on a a GAAP basis, but you know, it it dropped from 236,000,000 in 2023 to a hundred 97,000,000 in 2024.

I know there might have been some one offs in there because of GAAP or whatever, but, you know, just it looks like it was mostly in g and a. So maybe you could just talk about, you know, what you're doing there. You know, is that something we should expect to see, you know, further on a dollar basis even?

Michael Borg, CFO, Inogen: Sure. I might be happy to answer that. So a big chunk of that that reduction from 236,000,000 in OpEx in '23 to about a hundred 97 was a lot of it was related to onetime charge we had taken. But even if you exclude that, we're still looking at a 3% drop year over year. So just in terms of the overall comment on OpEx, what I would say is that we've we've been preaching about every dollar we spend as an investment in the company.

It's not just something we say, you know, in these calls. It's it's a culture we're driving, and we're seeing that. So our expectation is just continue to drive down those costs, and we do expect OpEx to be lower in in 2024 '25 rather. Sorry.

Mike Matson, Lead of the Med Tech Equity Research Team, Needham and Company: Yeah. Understood. Okay. Great. Thanks, guys.

I think we're gonna have to wrap up there. We're out of time. Hope you have some good meetings at the conference.

Michael Borg, CFO, Inogen: Thank you, Mike.

Kevin Smith, President and CEO, Inogen: Appreciate it.

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