Gross Margins Improvement
Q: How did COGS improvements impact gross margins, and what's the outlook?
A: The improvement in gross margins was largely due to the continued depletion of premium-priced components from previous years, leading to lower cost of goods sold. This resulted in a gross margin increase of 150 basis points to 44.1% in Q1 2024. While some higher-cost inventory remains on the balance sheet and will impact the P&L over the remainder of the year, it will be to a much lesser degree.

Impact of Competitor Exit
Q: Is the competitor's market exit creating opportunities or pricing power for Inogen?
A: The temporary exit of a competitor from the U.S. home respiratory market has provided only very modest tailwinds so far. Inogen is not seeing it as a meaningful growth contributor yet but is positioning itself to capitalize on potential future demand. Despite price pressures from low-cost competitors, Inogen maintains its position with a portable oxygen concentrator (POC) that has an 8-year useful life, which is 3 years longer than the next closest competitor, offering a distinct advantage to business-to-business partners.

Q2 Guidance and Channel Performance
Q: What is the outlook for Q2, and how will sales channels perform?
A: Inogen expects total sales of $81 million to $84 million in Q2 2024. While they are not providing channel-specific guidance, the outlook reflects current business trends, including the evolution of their channel mix and the impact of the new leadership team. The direct-to-consumer channel is considered a rebase year due to a reduced team size, but there are early signs of higher productivity. Achieving the higher end of guidance would require larger business-to-business orders.

Decline in Direct-to-Consumer Sales
Q: What caused the decline in direct-to-consumer sales, and has the DTC headcount changed?
A: The decline in direct-to-consumer sales, down 15.6% to $20.5 million in Q1 2024, is primarily due to a considerable reduction in representative headcount year-over-year. The DTC sales team now consists of 150 to 170 sales reps, and the company is focusing on growing this channel profitably rather than at all costs.

Rental Business and Gross Margin Outlook
Q: How did the rental business perform, and what is the gross margin outlook?
A: Rental revenue decreased 8.3% to $14.9 million in Q1 2024, primarily due to a higher mix of lower private payer reimbursement rates and higher rental revenue adjustments. Gross margin in rental revenue declined 1,040 basis points, affected by lower net revenue per patient and higher service costs. The company expects some continuation of these trends but cannot share a concrete gross margin outlook at this time.

U.S. B2B Business and Capital Environment
Q: Is the capital environment affecting the U.S. B2B business?
A: Inogen is not seeing any real headwinds from the capital markets impacting its U.S. business-to-business segment. Feedback from B2B partners is strong, and the company is confident in its ability to achieve guidance based on current trends.

Hospital Channel Strategy
Q: What is Inogen's strategy for the hospital channel?
A: Inogen sees an opportunity to expand in the hospital channel by providing oxygen to patients upon discharge, gaining earlier billing opportunities before patients reach capitated periods. They are exploring this strategy and have seen promising early results.