Inogen Announces First Quarter 2021 Financial Results

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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 March 31, 2021.

First Quarter 2021 Highlights

  • Total revenue of $86.9 million, down 1.8% from the same period in 2020, primarily due to the impacts of the COVID-19 pandemic
  • Domestic business-to-business revenue of $30.7 million, up 11.6% from the same period in 2020
  • Rental revenue of $9.9 million, up 84.2% from the same period in 2020
  • Cash, cash equivalents, and marketable securities were $233.2 million with no debt outstanding as of March 31, 2021

"While the COVID-19 pandemic continued to have an impact on our business in the first quarter of 2021, we saw sequential growth in all four channels, and sequential growth of 17.5% in total revenue for the reported quarter," said Inogen's President and Chief Executive Officer, Nabil Shabshab. "Additionally, our focus on the rental channel continues to produce strong operating performance with rental revenue growing significantly in the first quarter of 2021 versus the comparable period in the prior year. We continue to be focused on creating long-term value by increasing patient access to our products, enhancing physician advocacy, and driving product innovation."

First Quarter 2021 Financial Results

Total revenue for the three months ended March 31, 2021 declined 1.8% to $86.9 million from $88.5 million in the same period in 2020.

Domestic business-to-business sales in the first quarter of 2021 increased 11.6% to $30.7 million compared to $27.6 million in the first quarter of 2020. The Company believes this increase in the first quarter of 2021 was primarily due to greater demand for portable oxygen concentrators (POCs) for COVID-19 patients upon hospital discharge, partially offset by lower reseller demand. In addition, the Company believes the resolution of the competitive bidding uncertainty in October 2020 also contributed to increased demand in our domestic business-to-business channel during the first quarter of 2021.

International business-to-business sales in the first quarter of 2021 decreased by 21.7% (27.4% decrease on a constant currency basis) to $15.7 million compared to $20.1 million in the first quarter of 2020. The Company believes the decrease was primarily driven by the continued impact of the COVID-19 pandemic with intermittent lockdowns in many European countries, along with reduced operational capacity of certain European respiratory assessment centers.

Direct-to-consumer sales decreased 13.8% to $30.6 million in the first quarter of 2021 from $35.5 million in the first quarter of 2020. The Company believes the decrease was primarily driven by lower average inside sales representative headcount, which was down approximately 18% from the comparative period primarily due to the impacts of the COVID-19 pandemic on the Company's hiring of new sales representatives. However, the Company observed increased demand for POCs in the first quarter of 2021 compared to the fourth quarter of 2020, which the Company believes was associated with higher vaccination rates within our patient population and the relaxation of closure orders related to the COVID-19 PHE leading to increased ambulation, additional stimulus payments, and improved consumer confidence. This increased demand led to improved sales representative performance metrics versus each of the last three quarters in 2020 when these metrics declined associated with the COVID-19 pandemic.

Rental revenue in the first quarter of 2021 increased 84.2% to $9.9 million from $5.3 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 March 31, 2021, the Company had approximately 34,700 patients on service, which was up 7.8% sequentially compared to December 31, 2020, and up 41.1% compared to March 31, 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.

Total gross margin was 45.9% in the first quarter of 2021 versus 43.4% in the comparative period in 2020. Sales revenue gross margin increased to 44.7% in the first quarter of 2021 versus 43.3% in the first quarter of 2020, primarily due to lower manufacturing cost per unit in the quarter due to certain manufacturing inefficiencies experienced in the comparable period of 2020. This increase was partially offset by lower average selling prices due to an increased mix of domestic business-to-business sales, which have a lower gross margin versus the Company's direct-to-consumer sales. Rental revenue gross margin increased to 55.1% in the first quarter of 2021 versus 43.8% in the first 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 expense per patient on service.

Total operating expense increased to $42.0 million in the first quarter of 2021 versus $40.5 million in the first quarter of 2020, primarily due to CEO transition costs, an increase in the fair value of the New Aera earnout liability, and higher personnel-related expenses, partially offset by lower advertising expense. Research and development expense increased to $4.0 million in the first quarter of 2021, compared to $3.6 million in the first quarter of 2020, primarily associated with increased product development expense. Sales and marketing expense decreased to $25.5 million in the first quarter of 2021 versus $27.2 million in the comparative period of 2020, primarily due to decreased advertising expenditures, partially offset by increased personnel-related expenses. Advertising expenditures were $7.6 million in the first quarter of 2021 compared to $10.0 million in the first quarter of 2020. General and administrative expense increased to $12.5 million in the first quarter of 2021 versus $9.8 million in the first quarter of 2020 primarily due to $1.8 million in CEO transition costs and a $1.2 million increase in the fair value of the New Aera earnout liability, partially offset by lower consulting expense.

In the first quarter of 2021, the Company reported an operating loss of $2.1 million, Adjusted EBITDA of $5.4 million, a net loss of $0.7 million and loss per diluted common share of $0.03.

As of March 31, 2021, the Company had cash, cash equivalents, and marketable securities of $233.2 million with no debt outstanding.

Financial Outlook for 2021

Because of the uncertainties related to the COVID-19 pandemic, the Company is still 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 related impact on its financial results, including revenue, net income or loss, and Adjusted EBITDA estimates for such period.

Despite the ongoing COVID-19 pandemic, the Company believes it is prudent to continue to make investments in clinical research, research and development, and building the necessary infrastructure to support its strategy to focus on rentals at the onset-of-care. Given such investment initiatives, which the Company believes will support future revenue growth and predictability as well as margin expansion, the Company expects increased operating expense for the year in 2021. In addition, while the Company incurred minimal expenses related to bonus and performance-based stock-based compensation in 2020, it expects such costs to increase in 2021 along with certain expenses related to the previously announced recent officer transition