- Q2 2018 Sales Revenue up 58.5% Over the
Same Period in 2017 -
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
period ended June 30, 2018.
Second Quarter 2018 Highlights
- Record total revenue of $97.2 million,
up 51.6% over the same period in 2017
- Record sales revenue of $92.0 million,
up 58.5% over the same period in 2017
- Rental revenue of $5.3 million, down
13.7% from the same period in 2017
- Increase in planned hiring in Cleveland
by year-end 2020 to 500 employees, approximately two-thirds of
which are expected to be sales representatives, up from the
original target of 240 employees
- GAAP net income of $14.6 million,
reflecting a 75.2% increase over the same period in 2017 and a
15.0% return on revenue
- Adjusted EBITDA of $19.0 million,
representing 32.2% growth over the same period in 2017 and a 19.5%
return on revenue (see accompanying table for reconciliation of
GAAP and non-GAAP measures)
- Total units sold were 54,700, an
increase of 22,300, or 68.8%, over the same period in 2017
“The second quarter of 2018 was a notably strong quarter for us
as we generated record revenue across all three sales channels,
while also reporting record operating income,” said Chief Executive
Officer, Scott Wilkinson. “We are continuing to execute on our
strategy to hire additional sales representatives and invest in
advertising activities to increase consumer awareness as we believe
this is still our most effective means to drive high revenue growth
and portable oxygen concentrator adoption.”
Second Quarter 2018 Financial Results
Total revenue for the three months ended June 30, 2018 rose
51.6% to $97.2 million from $64.1 million in the same period in
2017. Direct-to-consumer sales rose 74.3% over the same period in
2017, ahead of expectations, primarily due to increased sales
representative headcount and additional consumer advertising.
Domestic business-to-business sales also exceeded expectations and
grew 55.7% over the same period in 2017, primarily driven by
continued strong demand from the Company’s private label partner
and traditional home medical equipment providers. International
business-to-business sales in the second quarter of 2018 increased
39.1% over the comparative period in 2017, primarily due to
continued adoption from our European partners and favorable
currency rates. Sales in Europe represented 88.3% of international
sales in the second quarter of 2018, up slightly from 87.6% in the
second quarter of 2017. Rental revenue in the second quarter of
2018 was $5.3 million compared to $6.1 million in the second
quarter of 2017, representing a decline of 13.7% from the same
period in the prior year. The decrease in rental revenue was
primarily due to a decline in net rental patients on service of
11.8% compared to the second quarter of 2017. Rental revenue
accounted for 5.4% of total revenue in the second quarter of 2018,
down from 9.5% of total revenue in the second quarter of 2017.
Total gross margin was 49.8% in the second quarter of 2018
versus 49.2% in the comparative period in 2017. The increase in
total gross margin was primarily due to a continued shift towards
sales revenue versus rental revenue. Sales gross margin was 51.1%
in the second quarter of 2018 versus 51.8% in the second quarter of
2017. The sales gross margin percentage declined primarily due to
lower average selling prices in both business-to-business channels
due to increased volumes and in the direct-to-consumer channel due
to a pricing trial and subsequent reduction of direct-to-consumer
pricing nationwide. This was partially offset by increased mix
towards direct-to-consumer sales and lower average cost of goods
sold per unit. Rental gross margin was 27.6% in the second quarter
of 2018 versus 25.0% in the second quarter of 2017. The increase in
rental gross margin was primarily due to lower depreciation
expense.
Total operating expense increased to $34.4 million, or 35.4% of
revenue, in the second quarter of 2018 versus $23.1 million, or
36.0% of revenue, in the second quarter of 2017.
Operating expense included research and development expense of
$1.8 million in the second quarter of 2018, which was up from $1.3
million in the comparative period in 2017, primarily due to
increased personnel-related expenses. Sales and marketing expense
increased to $23.0 million in the second quarter of 2018 versus
$11.9 million in the comparative period in 2017, primarily due to
personnel-related expenses as we continued to hire inside sales
representatives at our Cleveland facility and increased advertising
expenditures. General and administrative expense decreased to $9.7
million in the second quarter of 2018 versus $9.9 million in the
comparative period in 2017, primarily due to decreased bad debt
expense and patent litigation costs, partially offset by increased
personnel-related expenses.
The Company reported an income tax benefit of $1.0 million in
the second quarter of 2018, compared to an income tax expense of
$0.8 million reported in the second quarter of 2017. The Company’s
income tax benefit in the second quarter of 2018 included a $3.9
million decrease in provision for income taxes related to excess
tax benefits recognized from stock-based compensation compared to
$2.5 million in the second quarter of 2017. Excluding the
stock-based compensation benefit, the Company’s non-GAAP effective
tax rate in the second quarter of 2018 was 21.2% versus 36.2% in
the second quarter of 2017, primarily due to the impacts of the
U.S. federal tax reform.
In the second quarter of 2018, the Company reported net income
of $14.6 million, compared to net income of $8.3 million in the
second quarter of 2017. Earnings per diluted common share was $0.65
in the second quarter of 2018 versus $0.38 in the second quarter of
2017, an increase of 71.1%.
Adjusted EBITDA for the three months ended June 30, 2018 rose
32.2% to $19.0 million, or 19.5% of revenue, from $14.4 million, or
22.4% of revenue, in the second quarter of 2017.
Cash, cash equivalents, and marketable securities were $208.4
million as of June 30, 2018 compared to $188.3 million as of March
31, 2018, an increase of $20.1 million in the second quarter of
2018.
Financial Outlook for 2018
Inogen is increasing its full year 2018 total revenue guidance
range to $340 to $350 million, up from $310 to $320 million,
representing growth of 36.3% to 40.3% versus 2017 full year
results. The Company continues to expect direct-to-consumer sales
to be its fastest growing channel, domestic business-to-business
sales to have a significant growth rate, and international
business-to-business sales to have a solid growth rate, where the
2018 strategy will continue to be heavily focused on the European
markets. Inogen still expects rental revenue to be down
approximately 10% in 2018 compared to 2017 as the Company continues
to focus on sales.
Further, the Company is also increasing its full year 2018 GAAP
net income and non-GAAP net income guidance range to $45 to $48
million, up from $38 to $41 million, representing growth of 114.3%
to 128.5% compared to 2017 GAAP net income of $21.0 million and
growth of 57.5% to 67.9% compared to 2017 non-GAAP net income of
$28.6 million. The Company estimates that the decrease in provision
for income taxes related to excess tax benefits recognized from
stock-based compensation will lead to a reduction in provision for
income taxes of approximately $12 million in 2018, up from $8
million, based on forecasted stock activity, which would lower its
effective tax rate as compared to the U.S. statutory rate. The
Company expects its effective tax rate including stock-based
compensation deductions to vary quarter-to-quarter depending on the
amount of pre-tax net income, share price, and on the timing and
size of stock option exercises. Excluding the estimated $12 million
decrease in provision for income taxes expected in 2018, the
Company still expects a non-GAAP effective tax rate of
approximately 25%.
Inogen is also increasing its guidance range for full year 2018
Adjusted EBITDA to $65 to $69 million, up from $62 to $67 million,
representing 27.9% to 35.7% growth compared to 2017 results.
Inogen also still expects net positive cash flow for 2018 with
no additional 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) 238-8123 for
domestic callers or (412) 317-5217 for international callers.
Please reference Inogen (INGN) to join the call. 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 August 7, 2018
at 3:30pm PT/6:30pm ET through 3:30pm PT/6:30pm ET on August 14,
2018. To access the replay, dial (877) 344-7529 or (412) 317-0088
and reference Access Code: 10121605. 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; hiring and marketing expectations;
expectations for all revenue channels for full year 2018; the
expected impact of the decrease in provision for income taxes
related to excess tax benefits recognized from stock-based
compensation for full year 2018; and financial guidance for 2018,
including revenue, GAAP net income, Adjusted EBITDA, non-GAAP net
income, net cash flow, effective tax rates, and the need for
additional capital. 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 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;
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; risks related to
the recent data security incident, remediation measures, and
potential claims; 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 its Annual Report on Form 10-K
for the year ended December 31, 2017 and in its other filings with
the Securities and Exchange Commission. Additional information will
also be set forth in Inogen’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2018 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 six
months ended June 30, 2018 and June 30, 2017. 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, provision (benefit) for income taxes, and
certain other infrequently occurring items, such as acquisition
related costs, that may be incurred in the future.
Consolidated Balance Sheets (amounts in
thousands) June 30,
December 31, 2018 2017 (unaudited)
Assets Current assets Cash and cash equivalents $
166,344 $ 142,953 Marketable securities 42,068 30,991 Accounts
receivable, net 37,472 31,444 Inventories, net 27,407 18,842
Deferred cost of revenue 381 361 Income tax receivable 2,655 1,313
Prepaid expenses and other current assets 6,667 2,584
Total current assets 282,994 228,488 Property and equipment, net
21,972 20,103 Goodwill 2,304 2,363 Intangible assets, net 4,093
4,717 Deferred tax asset - noncurrent 20,736 18,636 Other assets
537 765
Total assets $ 332,636 $ 275,072
Liabilities and stockholders' equity Current
liabilities Accounts payable and accrued expenses $ 31,174 $
20,626 Accrued payroll 9,108 6,877 Warranty reserve - current 3,223
2,505 Deferred revenue - current 3,383 3,533 Income tax payable
344 345 Total current liabilities 47,232 33,886
Warranty reserve - noncurrent 5,507 3,666 Deferred revenue -
noncurrent 11,713 9,402 Deferred tax liability - noncurrent 340 348
Other noncurrent liabilities 938 729
Total
liabilities 65,730 48,031
Stockholders'
equity Common stock 21 21 Additional paid-in capital 231,879
218,109 Retained earnings 34,007 8,639 Accumulated other
comprehensive income 999 272 Total stockholders'
equity 266,906 227,041
Total liabilities and
stockholders' equity $ 332,636 $ 275,072
Consolidated Statements of Comprehensive Income
(unaudited) (amounts in thousands, except share and per
share amounts) Three
months ended Six months ended June 30, June
30, 2018 2017 2018 2017
Revenue Sales revenue $ 91,987 $ 58,038 $ 165,571 $ 104,004
Rental revenue 5,251 6,083 10,718
12,617
Total revenue 97,238 64,121 176,289 116,621
Cost
of revenue Cost of sales revenue 44,968 27,993 81,916 49,906
Cost of rental revenue, including depreciation of $1,966 and $2,522
for the three months ended and $4,131 and $5,211 for the six months
ended, respectively 3,800 4,561 8,176
9,404
Total cost of revenue 48,768 32,554
90,092 59,310
Gross profit 48,470
31,567 86,197 57,311
Operating expense
Research and development 1,775 1,260 3,191 2,569 Sales and
marketing 22,999 11,945 41,037 22,474 General and administrative
9,675 9,865 19,248 18,200
Total
operating expense 34,449 23,070 63,476
43,243
Income from operations 14,021
8,497 22,721 14,068
Other income (expense)
Interest income 673 146 1,216 247 Other income (expense)
(1,048 ) 523 (604 ) 730
Total other income
(expense), net (375 ) 669 612 977
Income before provision (benefit) for income taxes 13,646
9,166 23,333 15,045
Provision (benefit) for income taxes
(964 ) 828 (2,035 ) 775
Net
income $ 14,610 $ 8,338 $ 25,368 $ 14,270
Other
comprehensive income (loss), net of tax Change in foreign
currency translation adjustment 76 197 184 197 Change in net
unrealized gains (losses) on foreign currency hedging 723 (300 )
474 (246 ) Less: reclassification adjustment for net (gains) losses
included in net income (103 ) 49 69 (8
) Total net change in unrealized gains (losses) on foreign currency
hedging 620 (251 ) 543 (254 ) Change in net unrealized gains
(losses) on available-for-sale investments 19 (6 )
— 58
Total other comprehensive income (loss), net
of tax 715 (60 ) 727 1
Comprehensive income $ 15,325 $ 8,278 $ 26,095 $ 14,271
Basic net income per share attributable to common
stockholders (1) $ 0.69 $ 0.40 $ 1.20 $ 0.69
Diluted net
income per share attributable to common stockholders (1) $ 0.65
$ 0.38 $ 1.13 $ 0.66
Weighted-average number of shares used in
calculating net income
per share attributable to common
stockholders:
Basic common shares 21,172,170 20,622,320 21,099,566 20,556,293
Diluted common shares 22,503,749 21,848,359 22,409,011 21,731,592
(1) Reconciliations of net income attributable to common
stockholders basic and diluted can be found in Inogen’s Quarterly
Report on Form 10-Q to be filed with the Securities and Exchange
Commission.
Supplemental Financial Information (unaudited)
(in thousands, except units and patients)
Three months ended Six
months ended June 30, June 30, 2018
2017 2018 2017 Revenue by region and
category Business-to-business domestic sales $ 32,943 $ 21,154
$ 60,959 $ 38,615 Business-to-business international sales 20,759
14,919 37,665 26,342 Direct-to-consumer domestic sales 38,285
21,965 66,947 39,047 Direct-to-consumer domestic rentals
5,251 6,083 10,718 12,617
Total revenue
$ 97,238 $ 64,121 $ 176,289 $ 116,621
Additional financial
measures Units sold 54,700 32,400 100,100 58,000 Net rental
patients as of period-end 28,500 32,300 28,500 32,300
Reconciliation of U.S. GAAP to Other Non-GAAP Financial
Measures (unaudited) (in thousands)
Three months ended Six months ended
June 30, June 30, Non-GAAP EBITDA and Adjusted
EBITDA 2018 2017 2018 2017 Net
income $ 14,610 $ 8,338 $ 25,368 $ 14,270 Non-GAAP adjustments:
Interest income (673 ) (146 ) (1,216 ) (247 ) Provision (benefit)
for income taxes (964 ) 828 (2,035 ) 775 Depreciation and
amortization 2,816 3,117 5,809 6,321
EBITDA (non-GAAP) 15,789 12,137 27,926 21,119 Stock-based
compensation 3,186 2,216 6,567 4,107
Adjusted EBITDA (non-GAAP) $ 18,975 $ 14,353 $ 34,493 $ 25,226
Three months ended Six months ended June
30, June 30, Non-GAAP net income 2018
2017 2018 2017 Net income $ 14,610 $ 8,338 $
25,368 $ 14,270 Non-GAAP adjustments: 2017 U.S. tax reform(1)
— — — — Non-GAAP net income $ 14,610 $
8,338 $ 25,368 $ 14,270
Three months ended Six
months ended June 30, June 30, Non-GAAP
provision (benefit) for income taxes and effective tax rate
2018 2017 2018 2017 Income before
provision (benefit) for income taxes $ 13,646 $ 9,166 $ 23,333 $
15,045 Provision (benefit) for income taxes (964 ) 828 (2,035 ) 775
Effective tax rate -7.1 % 9.0 % -8.7 % 5.2 % Provision
(benefit) for income taxes $ (964 ) $ 828 $ (2,035 ) $ 775 Non-GAAP
adjustments: Excess tax benefits from stock-based compensation
3,853 2,489 7,105 4,702 2017 U.S. tax reform (1) — —
— — Provision for income taxes (non-GAAP) $ 2,889 $
3,317 $ 5,070 $ 5,477 Income before provision for income
taxes $ 13,646 $ 9,166 $ 23,333 $ 15,045 Provision for income taxes
(non-GAAP) 2,889 3,317 5,070 5,477 Effective tax rate (non-GAAP)
21.2 % 36.2 % 21.7 % 36.4 %
(1) On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was
enacted into law, which significantly changes existing U.S. tax law
and includes numerous provisions that affect the Company. During
the fourth quarter of 2017, the Company recorded an estimated
one-time net charge due to the impact of changes in the tax rate,
primarily on deferred tax assets. There were no related charges
during the second quarter or the first six months of 2018.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180807005655/en/
InogenInvestor Relations Contact:Matt Bacso,
CFAmbacso@inogen.net805-879-8205orMedia Contact:Byron
Myers805-562-0503
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