Inogen Inc (INGN)·Q3 2024 Earnings Summary

Executive Summary

• Q3 delivered 5.8% YoY revenue growth to $88.8M with gross margin expansion to 46.5%, second straight quarter of positive adjusted EBITDA, and positive cash generation; strength was led by B2B channels while DTC and rentals remained headwinds .
• FY24 revenue guidance was raised to $329–$331M (from $325–$330M after Q2), reflecting ~4–5% YoY growth; management reiterated back-half gross margin in the low-to-mid 40s and an adjusted EBITDA loss for 2H24 .
• Mix shifted further toward B2B (domestic +35% YoY; international +26%), offset by DTC sales (-23%) and rentals (-13%) given continued private-payer mix pressure and lower billing rates; FX was a ~20 bps headwind to total revenue in Q3 .
• Product cycle and regulatory pipeline sharpen the narrative into 2025: Rove 4 launched in Oct (U.S.) with DTC focus; Simeox FDA interactions “productive,” with earnout accrual now ~$11.9M signaling progress toward U.S. entry upon clearance .

What Went Well and What Went Wrong

• What Went Well

  • Strong B2B execution with two consecutive quarters of >20% YoY growth in POC sales, share gains with large accounts, and broad-based demand across U.S. and international channels (domestic B2B +35% YoY; OUS B2B +26%) .
  • Gross margin expanded 630 bps YoY to 46.5%, driven by lower raw material/component costs; sales gross margin +1,000 bps YoY; second straight positive adjusted EBITDA and positive cash generation .
  • Guidance raised on the back of execution; CEO: “We continued to make significant progress on our strategic priorities… advancing towards sustainable profitability.” .

• What Went Wrong

  • DTC sales declined 23% YoY amid downsized, streamlined salesforce and elevated advertising costs; management pruned underperforming campaigns given election-driven TV inflation .
  • Rental revenue fell 13% YoY, with rental gross margin pressured by mix shift to private payers, lower billing rates, and higher service costs .
  • FX headwind (~20 bps to total revenue) and channel mix (tilt to B2B) tempered otherwise stronger gross profit flow-through; management still expects 2H gross margin in low-to-mid 40s (below Q2’s 48.1% which included ~300 bps one-time reserve favorability) .

Financial Results

Segment/Channel Breakdown – Q3 2024 vs Q3 2023

Key KPIs

Notes:

• Q3 FX impact: ~-20 bps on total revenue; ~-70 bps on international revenue (CFO) .
• Balance sheet: Q3 cash and investments $124.3M; no debt; +$3.0M QoQ .

Guidance Changes

No formal guidance provided on OpEx, OI&E, tax, or dividends in Q3 materials .

Earnings Call Themes & Trends

Management Commentary

• CEO framing: “We continued to make significant progress on our strategic priorities… focused on driving growth, continuing innovation, and advancing towards sustainable profitability.”
• B2B execution: “We delivered… $89 million in total revenue… led by strong POC sales through our business-to-business channels… success taking and expanding share within the accounts of some of our largest customers.”
• Profit path: “We also achieved a second consecutive quarter of adjusted EBITDA profitability… proof that our strategy, portfolio and team can achieve long-term profitability.”
• Cost discipline amid ad inflation: “We have reduced some campaigns that were not returning value… emblematic of our efforts to evaluate the return on every dollar invested.”
• Product cycle: “We recently announced the launch of the Rove 4… the lightest weight and highest oxygen output 4-setting POC in the market.”
• CFO guidance: “We are raising our full year 2024 revenue expectations to $329–$331 million… For the back half… gross margins in the low to mid-40s and an overall adjusted EBITDA loss.”

Q&A Highlights

• DTC trajectory and salesforce: Management reiterated a “rebase year,” improving productivity per rep, and expects better YoY DTC performance in 2025; Patient First program targeted for full rollout in 1H25 .
• Cash flow sustainability: Two consecutive quarters of positive cash generation; noted Q4 is seasonally tougher and ad environment remains challenging, but focus remains on profitable growth, OpEx/CapEx control, and working capital .
• Simeox pathway: Management will provide an update “upon clearance”; CFO pointed to the ~$11.9M accrued earnout (max $13M) as an indicator of progress, while not confirming a filing .
• Rove 4 channel positioning: Expected to be more impactful for U.S. DTC in 2025; international B2B could participate, but U.S. HMEs typically prefer one longer-duration POC per patient .

Estimates Context

• We attempted to pull S&P Global consensus for Q3, Q2, and Q1 2024 but were rate-limited at the time of analysis, so we cannot quantify beats/misses versus consensus. Given the FY revenue guide raise and Q3 gross margin expansion, sell-side FY revenue models likely need to move modestly higher; margin expectations for 2H are unchanged in the low–mid 40s, and adjusted EBITDA remains guided to a loss in the back half .

Key Takeaways for Investors

• B2B-led growth story is intact with share expansion at large accounts and broad-based demand; B2B mix is the key revenue driver into 2025 while DTC is managed for profitability in the near term .
• Margin normalization from Q2’s one-off reserve benefit to Q3’s 46.5% remains consistent with the reiterated 2H low–mid 40s outlook; component cost tailwinds continue to help offset mix headwinds .
• DTC remains the swing factor for operating leverage: staffing/productivity and ad efficiency will determine the slope of improvement; rollout of Patient First in 1H25 and Rove 4’s DTC tilt are positive catalysts .
• Rentals face structural pressure from private payer mix and lower billing rates; hospital pilot aims to improve funnel timing and economics but will take time to contribute materially .
• Pipeline catalysts: Rove 4 commercial ramp (U.S. DTC) and potential U.S. clearance of Simeox; earnout accrual trend suggests advancing regulatory process and commercial readiness upon clearance .
• Balance sheet provides flexibility (no debt; $124.3M cash/investments) to navigate advertising inflation and invest in growth initiatives .
• Near-term trading setup: guidance raise and back-to-back positive adjusted EBITDA/cash generation are constructive; watch for any updates on Simeox clearance and early Rove 4 traction as potential incremental catalysts .

Appendix: Detailed Financial Statements (select lines)

• Q3 consolidated P&L (selected lines): Revenue $88.8M; Gross profit $41.3M; OpEx $49.1M; GAAP net loss $(6.0)M; Basic/Diluted EPS $(0.25) .
• Balance sheet highlights (9/30/24): Cash & equivalents $105.7M; Marketable securities $15.0M; Restricted cash $3.6M; Total assets $306.2M; No debt .
• Supplemental: Q3 units sold 43.9k; Net rental patients 51.4k .