- Q4 2016 Sales Revenue up 47.2% Over the
Same Period in 2015 -
- Q4 2016 Net Income up 36.3% Over the Same
Period in 2015 -
- Q4 2016 Adjusted Net Income up 85.0% Over
the Same Period in 2015 -
- Record Revenue for Full Year 2016
-
- Raises 2017 Guidance -
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-month and
twelve-month periods ended December 31, 2016.
Fourth Quarter 2016 Highlights
- Total revenue of $50.9 million, up
25.7% over the same period in 2015
- Sales revenue of $42.6 million, up
47.2% over the same period in 2015
- Rental revenue of $8.2 million, down
28.3% from the same period in 2015
- Net income of $5.3 million, reflecting
a 36.3% increase over the same period in 2015 and a 10.3% return on
revenue
- Adjusted net income of $5.3 million,
reflecting an 85.0% increase over the same period in 2015 and a
10.3% return on revenue (see accompanying table for reconciliation
of GAAP and non-GAAP measures)
- Adjusted EBITDA of $10.9 million,
representing 34.4% growth over the same period in 2015 and a 21.5%
return on revenue (see accompanying table for reconciliation of
GAAP and non-GAAP measures)
- Total units sold were 23,300, an
increase of 8,800, or 60.7%, over the same period in 2015,
reflecting the continued strong consumer demand for the Company’s
products across all sales channels
Full Year 2016 Financial Highlights
- Total revenue of $202.8 million, up
27.6% versus 2015
- Sales revenue of $168.2 million, up
48.0% versus 2015
- Rental revenue of $34.7 million, down
23.6% versus 2015
- Net income of $20.5 million,
representing 77.1% growth versus 2015 and a 10.1% return on
revenue
- Adjusted net income of $20.5 million,
representing 104.9% growth versus 2015
- Adjusted EBITDA of $43.4 million,
representing 34.3% growth versus 2015 and a 21.4% return on
revenue
“We’ve once again seen solid revenue growth led by continued
strong adoption by home medical equipment providers turning to
portable oxygen concentrators,” said Chief Executive Officer
Raymond Huggenberger. “We continue to demonstrate that we are not
only providing the best in class portable oxygen concentrators to
our patients, but also helping our business-to-business customers
improve their cost basis in the face of a challenging reimbursement
climate.”
Fourth Quarter 2016 Financial Results
Total revenue for the three months ended December 31, 2016 rose
25.7% to $50.9 million from $40.4 million in the same period in
2015. Domestic business-to-business sales exceeded expectations and
grew 69.0% over the same period in 2015, primarily driven by
traditional home medical equipment provider purchases and the
continued strength of our private label partner. International
business-to-business sales in the fourth quarter of 2016 also
exceeded expectations, growing 42.2% over the comparative period in
2015, primarily due to success with our large partners in Europe
and the addition of a new customer in South Korea.
Direct-to-consumer sales rose 34.2% over the same period in 2015,
approximately in line with expectations. Rental revenue decreased
28.3% from the same period in 2015, primarily due to the declines
in Medicare rental reimbursement rates, continued declines in
private-payor rates due to the lower Medicare rates, and a
continued focus on sales versus rentals, partially offset by the
one-time benefit of $2.0 million associated with the 21st Century
Cures Act, which is expected to be non-recurring and retroactively
increased the reimbursement rates in certain Medicare regions for
the second half of 2016. Rental revenue declined to 16.2% of total
revenue in the fourth quarter of 2016 from 28.4% of total revenue
in the fourth quarter of 2015.
Gross margin was 48.5% in the fourth quarter of 2016 versus
49.5% in the comparative period in 2015. Sales gross margin was
49.9% in the fourth quarter of 2016 versus 48.0% in the fourth
quarter of 2015. Sales gross margin improved primarily due to lower
cost of goods sold per unit associated with the upgraded Inogen One
G3 and the Inogen One G4, partially offset by an increase in sales
mix toward lower margin business-to-business sales as volumes in
these channels increased worldwide. Rental gross margin was 41.4%
in the fourth quarter of 2016 versus 53.4% in the fourth quarter of
2015, primarily due to lower net revenue per rental patient as a
result of reimbursement rate reductions, partially offset by the
non-recurring $2.0 million benefit from the 21st Century Cures Act
and lower cost of rental revenues associated with lower
depreciation and servicing costs per patient.
Total operating expense increased to $18.5 million in the fourth
quarter of 2016 versus $16.6 million in the fourth quarter of 2015
as the Company continued to make strategic investments in
additional personnel and incurred increased patent defense legal
costs. Total operating expense as a percentage of revenue decreased
to 36.4% in the fourth quarter of 2016 from 41.0% in the fourth
quarter of 2015.
Operating expense included research and development expense of
$1.2 million in the fourth quarter of 2016, which was consistent
with $1.2 million in the comparative period in 2015. Sales and
marketing expense was $9.3 million in the fourth quarter of 2016
versus $8.7 million in the comparative period in 2015, primarily
due to increased media expense and salesforce additions. General
and administrative expense was $8.0 million in the fourth quarter
of 2016 versus $6.6 million in the comparative period in 2015,
primarily due to increased personnel-related expenses and patent
defense legal costs.
During the fourth quarter of 2016, the Company elected to early
adopt Accounting Standards Update (ASU) 2016-09 ahead of the
mandatory 2017 effective date for all U.S. public companies. On
March 30, 2016, the Financial Accounting Standards Board issued ASU
2016-09, Improvements to Employee Share-Based Payment Accounting,
which simplifies the accounting for share-based payment
transactions, including the income tax consequences. The impact of
the adoption is favorable for full year 2016 and is expected to be
favorable for 2017. The adoption led to a decrease in provision for
income taxes of $6.0 million in full year 2016 (see accompanying
table for recast of the prior quarters net income and related
earnings per share).
Net income for the fourth quarter of 2016 increased 36.3% to
$5.3 million from $3.9 million in the fourth quarter of 2015, or
$0.25 per diluted common share compared to $0.19 in the fourth
quarter of 2015. In the fourth quarter of 2016, Inogen’s effective
tax rate was 9.8% compared to negative 16.3% in the fourth quarter
of 2015. Excluding the $1.7 million decrease in provision for
income taxes associated with the adoption of ASU 2016-09, Inogen’s
fourth quarter 2016 effective tax rate would have been 39.7%. In
the fourth quarter of 2015, Inogen’s effective tax rate of negative
16.3% was primarily due to the tax benefit adjustments of $1.0
million, which were mainly related to a decrease in the valuation
allowance related to California net operating losses. In addition,
the effective tax rate in the fourth quarter of 2015 was impacted
by an increase in equity compensation deductions and benefits
associated with the federal research and development tax credit and
the timing of stock dispositions in the fourth quarter of 2015.
Adjusted net income in the fourth quarter of 2016 increased
85.0% to $5.3 million from $2.8 million in the fourth quarter of
2015. Adjusted net income in the fourth quarter of 2016 did not
include any non-recurring tax benefit adjustments, compared to $1.0
million of tax benefit adjustments in the fourth quarter of 2015
but it did include a $1.7 million reduction in provision for income
taxes associated with ASU 2016-09.
Adjusted EBITDA for the three months ended December 31, 2016
rose 34.4% to $10.9 million from $8.1 million in the fourth
quarter of 2015.
Cash, cash equivalents, and marketable securities were $113.9
million as of December 31, 2016, compared to $108.3 million as of
September 30, 2016, an increase of $5.5 million in the fourth
quarter of 2016. This compares to $82.9 million of cash, cash
equivalents, and marketable securities as of December 31, 2015, an
increase of $31.0 million in full year 2016.
Financial Outlook for 2017
Inogen is increasing its 2017 revenue guidance to a range of
$233 to $239 million, which represents year-over-year growth of
14.9% to 17.8%. This compares to the previous revenue expectation
of $230 to $236 million. The Company expects direct-to-consumer
sales to be its fastest growing channel, followed by domestic
business-to-business sales to be its second fastest growing
channel, and international business-to-business sales to be its
third fastest growing channel, where the strategy will continue to
be heavily focused on the European markets. Inogen expects rental
revenue to continue to decline in 2017 compared to 2016 based on
lower average rental revenue per patient primarily due to the known
cuts from Medicare competitive bidding, continued reductions of
private insurance and Medicaid rates, and a continued focus on
sales versus rentals.
Inogen is also increasing its full year 2017 net income and
Adjusted net income guidance to $21 to $23 million, representing
2.3% to 12.1% year-over-year growth. This compares to the previous
guidance range of $16 to $18 million. Inogen estimates that the
adoption of ASU 2016-09 will lead to a decrease in provision for
income taxes of approximately $5.0 million in 2017 based on
forecasted stock activity, which will lower our effective tax rate.
Excluding the $5.0 million decrease in provision for income taxes
expected in 2017, the Company expects an effective tax rate of
approximately 37%. After giving effect to ASU 2016-09, the Company
expects an effective tax rate including stock compensation
deductions to vary quarter to quarter depending on the amount of
pre-tax net income and on the timing and size of stock option
exercises.
Inogen is also increasing its guidance range for full year 2017
Adjusted EBITDA to $46 to $50 million, representing 6.0% to 15.2%
year-over-year growth. This compares to the previous guidance range
of $45 to $49 million.
Inogen continues to expect net positive cash flow for 2017 with
no additional equity capital required to meet its current operating
plan.
Conference Call
Individuals interested in listening to the conference call today
at 1:30pm PT/4:30pm ET may do so by dialing (855) 427-4393 for
domestic callers or (484) 756-4258 for international callers.
Please reference Conference ID: 59665587. To listen to a live
webcast, please visit the Investor Relations section of Inogen's
website at: http://investor.inogen.com/.
A replay of the call will be available beginning February 28,
2017 at 4:30pm PT/7:30pm ET through 4:30pm PT/7:30pm ET on March 1,
2017. To access the replay, dial (855) 859-2056 or (404) 537-3406
and reference Conference ID: 59665587. The webcast will also be
available on Inogen's website for one year following the completion
of the call.
Inogen has used, and intends to continue to use, its Investor
Relations website, http://investor.inogen.com/, as a means of
disclosing material non-public information and for complying with
its disclosure obligations under Regulation FD. For more
information, visit http://investor.inogen.com/.
About Inogen
Inogen is innovation in oxygen therapy. We are a medical
technology company that develops, manufactures and markets
innovative oxygen concentrators used to deliver supplemental
long-term oxygen therapy to patients suffering from chronic
respiratory conditions.
For more information, please visit www.inogen.com.
Cautionary Note Concerning Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including, among others, statements regarding anticipated
growth opportunities; expectations that rental revenue will
continue to decline due to reductions in Medicare and private payor
reimbursement rates; expectations of growth in the
direct-to-consumer, business-to-business and international sales
channels; the expected impact of ASU 2016-09; and financial
guidance for 2017, including revenue, net income, Adjusted EBITDA,
Adjusted net income, net cash flow, effective tax rates and tax
benefit adjustments, and the need for equity financing.
Forward-looking statements are subject to numerous risks and
uncertainties that could cause actual results to differ materially
from currently anticipated results, including but not limited to,
risks arising from the possibility that Inogen will not realize
anticipated revenue; the impact of reduced reimbursement rates,
including private payor reductions and reductions in connection
with competitive bidding and the Center for Medicare and Medicaid
Services (CMS) rules; the possible loss of key employees,
customers, or suppliers; and intellectual property risks if Inogen
is unable to secure and maintain patent or other intellectual
property protection for the intellectual property used in its
products. In addition, Inogen's business is subject to numerous
additional risks and uncertainties, including, among others, risks
relating to market acceptance of its products; its ability to
continue its Inogen One G4 product rollout; competition; its sales,
marketing and distribution capabilities; its planned sales,
marketing, and research and development activities; interruptions
or delays in the supply of components or materials for, or
manufacturing of, its products; seasonal variations; unanticipated
increases in costs or expenses; and risks associated with
international operations. Information on these and additional
risks, uncertainties, and other information affecting Inogen’s
business operating results are contained in Inogen’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2016, and
in its other filings with the Securities and Exchange Commission.
Additional information will also be set forth in Inogen’s Annual
Report on Form 10-K for the year ended December 31, 2016 to be
filed with the Securities and Exchange Commission. These
forward-looking statements speak only as of the date hereof. Inogen
disclaims any obligation to update these forward-looking statements
except as may be required by law.
Use of Non-GAAP Financial Measures
Inogen has presented certain financial information in accordance
with U.S. GAAP and also on a non-GAAP basis for the three and
twelve months ended December 31, 2016 and December 31, 2015.
Management believes that non-GAAP financial measures, taken in
conjunction with U.S. GAAP financial measures, provide useful
information for both management and investors by excluding certain
non-cash and other expenses that are not indicative of Inogen's
core operating results. Management uses non-GAAP measures to
compare Inogen's performance relative to forecasts and strategic
plans, to benchmark Inogen's performance externally against
competitors, and for certain compensation decisions. Non-GAAP
information is not prepared under a comprehensive set of accounting
rules and should only be used to supplement an understanding of
Inogen's operating results as reported under U.S. GAAP. Inogen
encourages investors to carefully consider its results under U.S.
GAAP, as well as its supplemental non-GAAP information and the
reconciliation between these presentations, to more fully
understand its business. Reconciliations between U.S. GAAP and
non-GAAP results are presented in the accompanying table of this
release. For future periods, Inogen is unable to provide a
reconciliation of non-GAAP measures without unreasonable effort as
a result of the uncertainty regarding, and the potential
variability of, the amounts of interest income, interest expense,
depreciation and amortization, stock-based compensation, provisions
for income taxes, and certain other infrequently occurring items,
such as acquisition related costs, that may be incurred in the
future.
Balance Sheet (unaudited) (amounts in
thousands) December 31,
2016 2015 Assets
Current assets Cash and cash equivalents $ 92,851 $ 66,106
Marketable securities 21,033 16,793 Accounts receivable, net 30,828
19,872 Inventories, net 14,343 8,648 Deferred cost of revenue 398
397 Income tax receivable 433 2,158 Prepaid expenses and other
current assets 1,659 870 Total current
assets 161,545 114,844 Property and equipment, net 25,199 30,680
Intangible assets, net 241 229 Deferred tax asset - noncurrent
26,654 15,464 Other assets 410 97
Total assets $ 214,049 $ 161,314
Liabilities and stockholders' equity Current
liabilities Accounts payable and accrued expenses $ 12,795 $
12,867 Accrued payroll 6,123 5,271 Current portion of long-term
debt — 315 Warranty reserve - current 1,688 1,226 Deferred revenue
- current 2,239 2,323 Income tax payable — 11
Total current liabilities 22,845 22,013 Warranty reserve -
noncurrent 1,792 747 Deferred revenue - noncurrent 7,042 4,199
Other noncurrent liabilities 282 337
Total liabilities 31,961 27,296
Stockholders' equity Common stock 20 20 Additional paid-in
capital 194,466 179,143 Accumulated deficit (12,363 ) (45,108 )
Accumulated other comprehensive loss (35 ) (37 )
Total stockholders' equity 182,088 134,018
Total liabilities and stockholders' equity $ 214,049
$ 161,314
Statements of Comprehensive
Income (unaudited) (amounts in thousands, except
share and per share amounts)
Three months ended Twelve months ended December
31, December 31, 2016
2015 2016 2015
Revenue Sales revenue $ 42,604 $ 28,943 $ 168,170 $
113,625 Rental revenue 8,247 11,503
34,659 45,380
Total revenue
50,851 40,446 202,829 159,005
Cost of revenue Cost of sales
revenue 21,330 15,052 85,154 61,553
Cost of rental revenue, including
depreciation of $2,696 and $3,036 for the three months ended and
$11,429 and $11,965 for the twelve months ended, respectively
4,833 5,356 20,365
21,194
Total cost of revenue 26,163
20,408 105,519 82,747
Gross profit 24,688 20,038
97,310 76,258
Operating expense
Research and development 1,216 1,226 5,113 4,180 Sales and
marketing 9,320 8,746 37,540 31,369 General and administrative
7,981 6,592 31,793
25,658
Total operating expense 18,517
16,564 74,446 61,207
Income from operations 6,171 3,474
22,864 15,051
Other income
(expense) Interest expense — (4 ) (6 ) (22 ) Interest income 70
36 196 102 Other expense (407 ) (189 ) (329 )
(404 )
Total other expense, net (337 )
(157 ) (139 ) (324 )
Income before provision
(benefit) for income taxes 5,834 3,317 22,725 14,727
Provision (benefit) for income taxes 574
(541 ) 2,206 3,142
Net
income $ 5,260 $ 3,858 $ 20,519 $ 11,585
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on foreign currency hedging during the
period 79 (14 ) 55 (14 ) Add: reclassification adjustment for gains
(losses) included in net income (45 ) —
6 — Total unrealized gain (loss) on foreign
currency hedging 34 (14 ) 61 (14 ) Unrealized loss on
available-for-sale investments during the period (75 )
(23 ) (59 ) (23 )
Total other comprehensive
income (loss), net of tax (41 ) (37 ) 2
(37 )
Comprehensive income $ 5,219 $
3,821 $ 20,521 $ 11,548
Basic net
income per share attributable to common stockholders (1) $ 0.26
$ 0.20 $ 1.02 $ 0.60
Diluted net income per share attributable
to common stockholders (1) $ 0.25 $ 0.19 $ 0.97 $ 0.56
Weighted-average number of shares used
in calculating net income per share attributable to common
stockholders:
Basic common shares 20,310,857 19,689,662 20,067,152 19,398,991
Diluted common shares 21,362,513 20,812,773 21,095,867 20,708,170
(1) Reconciliations of net income
attributable to common stockholders basic and diluted can be found
in Inogen’s Annual Report on Form 10-K to be filed.
Supplemental Financial Information (unaudited) (in
thousands, except units and patients)
Three months ended December 31, Twelve months ended
December 31, 2016 2015 2016
2015 Revenue by region and category
Business-to-business domestic sales $ 14,958 $ 8,850 $ 56,605 $
34,440 Business-to-business international sales 12,091 8,505 50,106
35,345 Direct-to-consumer domestic sales 15,555 11,588 61,459
43,840 Direct-to-consumer domestic rentals 8,247
11,503 34,659 45,380
Total revenue $ 50,851 $
40,446 $ 202,829 $ 159,005
Additional financial measures
Units sold 23,300 14,500 92,000 56,600 Net rental patients as of
period-end 33,300 32,800 33,300 32,800
Reconciliation of
U.S. GAAP to Other Non-GAAP Financial Information (unaudited)
(in thousands)
Three months
ended Twelve months ended December 31,
December 31, Non-GAAP EBITDA and Adjusted EBITDA
2016 2015
2016 2015 Net income $ 5,260 $
3,858 $ 20,519 $ 11,585 Non-GAAP adjustments: Interest expense — 4
6 22 Interest income (70 ) (36 ) (196 ) (102 ) Provision (benefit)
for income taxes 574 (541 ) 2,206 3,142 Depreciation and
amortization 3,268 3,544 13,558
14,012 EBITDA (non-GAAP) 9,032 6,829 36,093
28,659 Stock-based compensation 1,890 1,297
7,294 3,640 Adjusted EBITDA
(non-GAAP) $ 10,922 $ 8,126 $ 43,387 $ 32,299
Three months ended Twelve months ended
December 31, December 31, Non-GAAP Adjusted net
income 2016 2015
2016 2015 Net income $
5,260 $ 3,858 $ 20,519 $ 11,585 Non-GAAP adjustments:
Tax benefit adjustments 3
— (1,014 ) — (1,570 )
Adjusted net income (non-GAAP) $ 5,260 $ 2,844 $
20,519 $ 10,015
Three months ended
Twelve months ended December 31, December 31,
Non-GAAP Operating expense 2016
2015 2016 2015
Operating expense $ 18,517 $ 16,564 $ 74,446 $ 61,207
Non-GAAP adjustments:
Audit committee investigation and related
class action lawsuit expenses 1
— — — (1,787 )
Litigation settlement benefit, net 2
110 — 202 —
Operating expense, excluding certain operating expenses (non-GAAP)
$ 18,627 $ 16,564 $ 74,648 $ 59,420
Three months ended Twelve months ended
December 31, December 31, Non-GAAP - Sales,
General & Administrative (SG&A) expense
2016 2015 2016
2015 SG&A expense $ 17,301 $ 15,338
$ 69,333 $ 57,027 Non-GAAP adjustments:
Audit committee investigation and related
class action lawsuit expenses 1
— — — (1,787 )
Litigation settlement benefit, net 2
110 — 202 —
SG&A expense, excluding certain operating expenses (non-GAAP) $
17,411 $ 15,338 $ 69,535 $ 55,240
1 Includes expenses associated with our
2015 audit committee investigation and related securities class
action lawsuit that was subsequently dismissed on June 29,
2015.
2 Consists of a patent litigation
settlement benefit partially offset by a litigation expense
associated with a labor law class-action lawsuit that was accrued
in the first quarter of 2016 and paid in the fourth quarter of
2016.
3 Tax benefit adjustments related to the
release and adjustment of the valuation allowances associated with
the net operating loss carryforwards for the quarter ended and for
the year ended December 31, 2015.
Recast of the prior quarters net income
and related earnings per share
(unaudited)
For the Three Months Ended
March 31, 2016 June 30, 2016
September 30, 2016
(amounts in thousands, except share and
per shares amounts)
As reported As adjusted As reported
As adjusted As reported As
adjusted Provision for income taxes $ 1,035 $ 879 $ 2,900 $ 550
$ 1,994 $ 203 Net income 2,365 2,521 5,142 7,492 3,455 5,246
Weighted-average common shares - basic
common stock
19,827,669 19,827,669 19,972,395 19,972,395 20,157,688 20,157,688
Weighted-average common shares - diluted
common stock
20,783,943 20,840,367 20,925,613 20,997,429 21,100,725 21,182,587
Net income per share - basic common stock $ 0.12 $ 0.13 $
0.26 $ 0.38 $ 0.17 $ 0.26 Net income per share - diluted common
stock 0.11 0.12 0.25 0.36 0.16 0.25 (unaudited)
For the Six Months Ended For the Nine Months Ended
June 30, 2016 September 30, 2016
(amounts in thousands, except share and
per share amounts)
As reported As adjusted As reported As
adjusted Provision for income taxes $ 3,935 $ 1,429 $ 5,929 $
1,632 Net income 7,507 10,013 10,962 15,259
Weighted-average common shares - basic
common stock
19,900,032 19,900,032 19,986,544 19,986,544
Weighted-average common shares - diluted
common stock
20,860,878 20,931,802 20,924,022 21,000,945 Net income per
share - basic common stock $ 0.38 $ 0.50 $ 0.55 $ 0.76 Net income
per share - diluted common stock 0.36 0.48 0.52 0.73
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Inogen, Inc.Investor Relations Contact:805-562-0500 ext.
7ir@inogen.netorMedia Contact:Byron Myers805-562-0503
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