Inogen announces fourth quarter 2020 financial results

Inogen, Inc., 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.

Business Wire