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II

Inogen Inc (INGN)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 revenue was $88.8M, up 6.1% year over year and 14% sequentially; total gross margin expanded to 48.1% (from 40.7% YoY) on lower component premiums and ~300 bps favorable reserve adjustments; adjusted EBITDA turned positive at $1.3M .
  • Mix shift and headcount reductions pressured direct-to-consumer (DTC) sales (-15.6% YoY) and rentals (-6.2% YoY); rental gross margin fell 430 bps on more private payer mix and fewer billable patients .
  • Inogen exceeded prior Q2 guidance ($81–$84M) and initiated FY 2024 revenue guidance at $325–$330M (+3–5% YoY); management guided H2 gross margin to the low-to-mid 40s and flagged elevated TV ad rates as an H2 headwind .
  • Strategic catalysts: continued B2B strength (domestic +16.5%, international +31.1%) including modest tailwind from a competitor’s exit; Rove 4 launch expected in H2; Simeox U.S. clearance progress (timing not disclosed) .

What Went Well and What Went Wrong

What Went Well

  • Strong B2B execution: domestic +16.5% to $21.3M; international +31.1% to $30.5M; management highlighted differentiated POC offerings and strengthened customer relationships .
  • Gross margin expansion: total GM 48.1% (+740 bps YoY), with sales GM 48.5% (benefit from lower premium components and ~300 bps reserve adjustment) .
  • Turn to adjusted EBITDA profitability: adjusted EBITDA +$1.3M; CEO emphasized “first quarter of adjusted EBITDA profitability” under current tenure .

What Went Wrong

  • DTC pressure: DTC sales fell 15.6% YoY to $22.6M on downsized sales force; higher TV ad costs (election season) expected to weigh on H2 lead generation .
  • Rental headwinds: rental revenue -6.2% YoY to $14.3M; rental GM down 430 bps on more private payer mix and reduced percentage of billable patients .
  • OpEx increased: total operating expense rose 8.7% YoY to $49.8M on higher personnel costs; advertising expense inflation cited as a continuing pressure into H2 .

Financial Results

Consolidated P&L, Margins, EPS, Cash

MetricQ4 2023Q1 2024Q2 2024
Revenue ($USD Millions)$75.9 $78.0 $88.8
GAAP Diluted EPS ($)-$1.14 -$0.62 -$0.24
Adjusted Diluted EPS ($)-$0.83 -$0.45 -$0.07
Total Gross Margin (%)37.1% 44.1% 48.1%
Sales Gross Margin (%)32.8% 44.1% 48.5%
Rental Gross Margin (%)52.7% 43.7% 46.2%
Total Operating Expense ($USD Millions)$57.1 $50.6 $49.8
Loss from Operations ($USD Millions)-$28.98 -$16.27 -$7.06
Adjusted EBITDA ($USD Millions)-$17.35 -$7.64 +$1.26
Cash, Cash Equivalents, Marketable Securities, Restricted Cash ($USD Millions)$128.5 $119.8 $121.2

Segment/Channel Breakdown and KPIs

Metric ($USD Millions unless noted)Q4 2023Q1 2024Q2 2024
B2B Domestic Sales$18.1 $16.5 $21.3
B2B International Sales$21.5 $26.0 $30.5
DTC Domestic Sales$19.8 $20.5 $22.6
DTC Domestic Rentals$16.5 $14.9 $14.3
Total Units Sold (thousands)34.1 33.9 41.3
Net Rental Patients (period-end, thousands)51.9 51.8 51.9

Actual vs Company Guidance (Q2 2024)

MetricPeriodCompany GuidanceActualOutcome
Revenue ($USD Millions)Q2 2024$81–$84 $88.8 Above guidance

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2024N/A$325–$330 Initiated
Total Gross Margin (%)H2 2024N/ALow–mid 40s Initiated
Advertising Cost EnvironmentH2 2024N/AElevated TV ad costs expected (election) New headwind
Revenue ($USD Millions)Q2 2024$81–$84 $88.8 reported Above guidance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’23 and Q1’24)Current Period (Q2’24)Trend
B2B demand/competitive dynamicsVolatility with competitor exit; modest tailwind; domestic B2B down in Q4, international up; cautious on pricing pressure Broad-based demand with domestic +16.5% and international +31.1%; modest tailwind from a competitive exit; no outsized one-time orders Improving; strengthened relationships; sustained momentum
DTC sales force/productivityRebase year; materially downsized team; early productivity gains per rep DTC down YoY but sequential growth; team size 150–170 reps; election ad costs could reduce leads Stabilizing; sequential improvement; external ad cost headwind
Rentals/mix and reimbursementLower Medicare rate from Jan; mix shift to private pay; higher service costs; prescriber channel brought in-house Rental revenue down; fewer billable patients; hospital pilot to capture earlier discharge and more months billed Challenged near term; structural initiatives underway
Gross margin driversCOGS improvement as premium components deplete; modest GM uplift guided for Q1 vs Q4 GM boosted by lower component premiums and ~300 bps reserves; H2 GM guided low–mid 40s Positive trajectory; normalization as reserves benefit fades
Innovation roadmapPhysio-Assist (Simeox) regulatory progress; digital health app/portal updates Rove 4 launch expected H2; continue toward FDA clearance for Simeox; invest in digital offerings Pipeline progressing; potential H2 product catalyst

Management Commentary

  • “We achieved $89 million in total second quarter revenue, reflecting 6% year-over-year growth and 14% growth from the first quarter of 2024.” — Kevin Smith, CEO .
  • “I’m thrilled to report first quarter of adjusted EBITDA profitability in my tenure at Inogen.” — Kevin Smith, CEO .
  • “Total gross margin was 48.1%,… driven primarily by lower premiums paid for components as well as onetime favorable adjustments to reserves (~300 bps).” — Michael Bourque, CFO .
  • “We continue to expect the launch of the newest generation POC, the Rove 4 in the back half of the year… and look forward to bringing the Simeox product to the U.S. market” — Kevin Smith, CEO .

Q&A Highlights

  • DTC structure and productivity: Management reiterated DTC sales team size of 150–170 reps, focusing on productivity improvements and a “patient-first” pilot enabling reps to process both cash sales and insurance rentals .
  • Rental strategy: Hospital pilot aims to capture patients at discharge to extend billing duration and increase referrals per sales call; near-term financial contribution expected once fully executed .
  • Guidance philosophy and H2 outlook: Conservative ranges; anticipated election-related ad cost inflation may depress DTC leads; H2 gross margins guided to low–mid 40s .
  • Gross margin one-time effects: Approximately 300 bps benefit from reserve adjustments flowed through sales gross margin in Q2 .
  • Pricing dynamics: Pricing discipline amid competitive pressure; B2B pricing relatively stable; DTC pricing faces reseller pressure .

Estimates Context

  • Wall Street consensus via S&P Global for Q2 2024 (EPS and revenue) was unavailable at the time of retrieval due to access limits; therefore, estimate comparisons are not included. As a proxy, Inogen’s Q2 revenue exceeded its own guidance range ($81–$84M) with $88.8M reported . Values retrieved from S&P Global were unavailable at time of fetch.

Key Takeaways for Investors

  • Operational execution is improving: consecutive revenue growth from Q4→Q1→Q2 and a sharp gross margin rebound to 48.1%, aided by component cost normalization and one-time reserve benefits; adjusted EBITDA turned positive .
  • B2B channels are the growth engine: double-digit domestic and international gains, with a modest tailwind from a competitor’s exit; management emphasizes relationship strength and product differentiation (8-year service life, premium positioning) .
  • DTC and rentals remain the swing factors: DTC sequentially improved but faces H2 ad-cost pressure; rentals pressured by private payer mix and fewer billable patients; hospital pilot could structurally improve rental economics over time .
  • 2024 setup: FY revenue guide $325–$330M (+3–5% YoY) with H2 gross margins low–mid 40s suggests normalized margins absent Q2’s reserve benefit; monitor mix, pricing, and ad costs into H2 .
  • Catalysts: Rove 4 launch (H2) and Simeox U.S. clearance progress could expand portfolio and deepen clinical relationships; June study supports POCs’ survival and cost-effectiveness narrative, potentially aiding adoption .
  • Balance sheet strength: $121.2M in cash and equivalents, no debt, provides flexibility to navigate ad cost headwinds and invest in innovation .
  • Near-term trading implication: Positive print versus company guidance and GM expansion are supportive; watch for confirmation of sustained EBITDA profitability absent one-time GM benefits and for qualitative color on H2 ad pressures in upcoming communications .