Welcome to Inogen’s Second Quarter 2023 Earnings Conference Call. As a reminder, this conference is being recorded today, August 7, 2023. I would now like to turn the call over to Agnes Lee, Senior Vice President of Investor Relations and Strategic Planning.

Thank you, Doug. Hello, everyone, and thank you for participating in today’s call. Joining me on the call today are President and CEO, Nabil Shabshab, and CFO, Kristin Caltrider. Earlier today, Inogen released financial results for the second quarter of 2023. This earnings release is currently available in the Investor Relations section of the company’s website, along with a supplemental financial package. As a reminder, the information presented today will include forward-looking statements, including, without limitation, statements about our growth prospects and strategy for 2023 and beyond, expectations related to our financial results for 2023, expectations regarding increasing productivity of our internal and external sales teams, progress of our strategic initiatives, including innovation, our expectations regarding the market for our products on our business, and the supply and demand for our products in both the short term and long term. Forward-looking statements in this call are based on information currently available to us as of today’s date, August 7, 2023. These forward-looking statements are only predictions and involve risks and uncertainties that are set forth in more detail in our most recent periodic reports filed with the SEC. Actual results may vary, and we disclaim any obligation to update these forward-looking statements, except as may be required by law. We have posted historical financial statements and our investor presentations in the Investor Relations section of the company’s website. Please refer to these files for more detailed information. During the call, we will also present certain financial information on a non-GAAP basis. 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 items and other expenses that are not indicative of Inogen’s core operating results. Management uses non-GAAP measures internally to understand, manage and evaluate our business and make operating decisions. Reconciliations between U.S. GAAP and non-GAAP results are presented in tables within our earnings release. With that, I will turn the call over to Inogen’s President and CEO, Nabil Shabshab. Nabil?

Thanks, Agnes. Good afternoon and thank you for joining our second quarter 2023 conference call. During today’s call, we would like to work our way through high-level comments around our performance in the quarter, how that relates to our outlook for 2023 and provide an update on our progress and mitigation plans. Then we will transition to Kristin, who will walk through the details of our financial performance and our annual guidance before we take your questions at the end of the call. In summary, while we have made progress with the execution of our commercial strategy, we are disappointed with the performance this quarter. Our revenue for the quarter fell short, mainly due to two factors: primarily due to the headwinds with a few key accounts, predominantly in the U.S., and slower-than-expected progress on our direct-to-consumer productivity initiatives despite continued sequential improvement. Considering the shortfall this quarter and understanding that our mitigation actions might take longer than expected to materialize, we are resetting expectations for revenue and adjusted EBITDA for the balance of the year. 2023 revenue is now expected to be within the range of $315 million to $320 million. Despite the decrease in revenue, our focus on cost containment allows us to limit the impact on adjusted EBITDA. Therefore, we expect the full year to be a loss in the range of $20 million to $25 million. I would like now to spend some time talking through factors that impacted our revenue in the quarter and the actions that we are taking. We believe patient demand for long-term oxygen therapy remains stable and is slowly recovering. However, in the business-to-business channel, some customers continue to face pressures relating to capital deployment and the cost of borrowing while focusing on margin improvement. Coupled with aggressive competitive pricing activities, this continued to impact our performance, especially with some of our large customers. The supply chain constraints related to semiconductor availability from mid-2021 through 2022 required us to prioritize channels that could deliver higher revenue and margin when we were unable to fully meet market demand. This provided an opportunity for lower-cost competitors to aggressively push for share gains during a prolonged but necessary period of back orders in the U.S. business-to-business channel. We were able to remediate most of the back orders by the end of Q3 and into Q4 of 2022 but subsequently saw increased competitive pricing tactics in 2023. Based on our analysis, we now understand that this backlog and the resulting circumstances had a bigger impact on some of our key accounts than we had expected. Our focus has been on regaining some of the business lost in key accounts as well as winning new customers. Our strategy in business-to-business channels includes delivering enduring benefits to our customers through a strong total cost of ownership model, high patient and prescriber brand recognition, best-in-class device quality, and top-tier aftersales service. Our strong value proposition is allowing us to win back some of the lost business as well as win new accounts incrementally. We are focusing on advancing customer conviction around the benefits of the non-delivery long-term oxygen therapy model and Inogen’s ability to consistently deliver value beyond the uni-dimensional benefits of a lower acquisition price. Additionally, our business development efforts now include the value of future partnerships with business-to-business customers as a result of Inogen’s investment in innovations and how that could expand our customers’ access to patient populations and indications beyond COPD via new product introductions over the next 2 to 4 years. We are also pleased by our recent completion of the necessary regulatory steps to allow us to commercialize our new Rove 6 as a portable oxygen concentrator with an approved 8-year expected service life. The 8-year expected service life will also cover the current G5 portable concentrator, and in both cases, it's a critical element that further strengthens Inogen’s value proposition as it relates to delivering a better return to business-to-business customers due to an optimized total cost of ownership. Moving to our direct-to-consumer business, we have remained focused on scaling the new disciplines in direct-to-consumer as we work towards achieving scalable and profitable growth measured through productivity per sales representative. As a result of institutionalizing the new sales disciplines and the broader direct-to-consumer organization, we have delivered sequential improvements of about 30 percentage points in both unit and revenue productivity per representative with a double-digit reduction in the number of sales representatives and low single-digit reduction in marketing leads. We believe that during the remainder of 2023, our progress on the revised sales management strategy would get us closer to a steady state and set us up to meet our 2024 aspirations for that channel in terms of both growth and profitability. For our international business-to-business sector, we continue to drive our value proposition to expand business with current customers as well as win new ones. Our Rove 6 launch in Europe is progressing well, and we have been recently notified that the last remaining signature required to publish the new reimbursement code in France has been secured. We also believe that the 8-year expected service life for Rove 6 will further enhance Inogen’s value proposition to business-to-business customers. Rental revenue continues to benefit from improved prescriber team productivity with double-digit increases in referrals per sales representative compared to Q1. We expect to see steady progress as we further optimize sales territories and call frequency to drive scale per account and overall growth. In summary, we believe headwinds in business-to-business are generally transient in nature and could be addressed in the short to medium term by working through challenges and opportunities with existing customers while equally focusing on winning new accounts. As part of our plans to provide a path forward to revenue growth and profitability in the medium term, we are maintaining critical investments while closely managing operating expenses and adjusted EBITDA throughout 2023. Part of our ongoing investments supporting organic growth is directed at expanding the patient population and indications we serve beyond COPD. Additionally, regarding inorganic growth, upon the close of the transaction, Physio-Assist will provide an opportunity for Inogen to enter the airway clearance adjacency through a clinically differentiated offering. Physio-Assist will allow Inogen to access respiratory patients earlier and before they require long-term oxygen therapy, hence expanding a patient’s lifetime value for the company. This acquisition met our strategic clinical, financial, and capital deployment criteria, and we expect to pause our M&A efforts and, upon close, focus on executing the commercial, clinical, and regulatory milestones to deliver the expected returns. I will now turn the call over to Kristin for a review of financial results. Kristin?

Thank you, Nabil, and good afternoon, everyone. Unless otherwise noted, all financial comparisons are to the prior year comparable period. Total revenue for the second quarter of 2023 was $83.6 million, a decrease of 19.1% versus the prior period. The decrease was driven primarily by lower international sales and lower direct-to-consumer sales, partially offset by an increase in U.S. business-to-business sales and rental revenue. For the second quarter, foreign exchange, net of hedging, had a negative 60 basis points impact on total revenue and a negative 130 basis point impact on international revenue. On a constant currency basis, second quarter total revenue decreased 18.5%. Looking at second quarter revenue on a more detailed basis, domestic business-to-business revenue increased 63% to $18.3 million in the second quarter of 2023 compared with $11.2 million in the comparable period. It is important to note that the domestic business-to-business revenue was down considerably in the second quarter of 2022 due to supply constraints that limited shipments to the channel. Despite this good growth, we had expected an even larger increase in domestic B2B sales now that the supply constraints have been diminished. International B2B sales decreased 37.8% to $23.3 million in the second quarter of 2023 as compared to $37.4 million in the prior period. Last year, international sales were higher as we prioritized shipments to Europe due to the pending expiration of EU MDD certificates in May of 2022. Given the tough comparable, we expected a year-over-year decrease, but sales were short of our expectations. Direct-to-consumer sales decreased 34.1% to $26.8 million in the second quarter of 2023 from $40.6 million in the prior period, driven primarily by lower sales volume due to fewer inside sales representatives and lower marketing and advertising spend as we continue to drive towards improved profitability in this channel. Rental revenue increased 8.6% to $15.3 million in the second quarter of 2023 from $14.1 million in the prior period. We have seen continued growth in rental patients on service and higher Medicare reimbursement rates. This was partially offset by rental revenue adjustments, which were part of our work to improve collections processes and cleanup aged receivables. Now on to discuss our gross margins. Total gross margin was 40.7% in the second quarter, declining 400 basis points from the prior period as the benefit realized from lower component costs was more than offset by the impact of unfavorable channel mix and lower average selling prices in the U.S. business-to-business channel. Sales revenue gross margin was 38.5% in the second quarter of 2023, declining 480 basis points from the comparable period, driven primarily by a shift in channel mix with a higher volume of units sold through the domestic business-to-business channel versus the direct-to-consumer and international business-to-business channels. There was additional impact to pricing due to pricing pressure in the business-to-business channel. This was partially offset by lower premiums paid for components. Rental revenue gross margin was 50.5% in the second quarter of 2023 versus 54.2% in the prior period, a decline of 360 basis points. The margin compression was primarily driven by higher patient servicing costs and the one-time impact of rental revenue adjustments, partially offset by higher Medicare reimbursement rates. Moving on to operating expense. In Q2, total operating expense decreased to $45.8 million compared to $49.1 million in the prior period, representing a decrease of 6.8%. The reduction in spend is a result of the steps we have taken to mitigate the impact of the macroeconomic headwinds we have encountered in 2023. The current quarter included restructuring and other related charges of $200,000 and acquisition-related costs totaling $500,000. Excluding the one-time charges, operating expenses decreased to $45.1 million, representing a reduction of 11.8% as compared with the prior period. Of note, excluding one-time charges, operating expenses were reduced by $5.1 million compared to the first quarter of 2023. Going into more detail on our expenses in the second quarter, we have continued to work on our innovation pipeline through investment in research and development with a total spend for the quarter of $4.3 million. This spend was 29.2% lower than the second quarter of 2022, primarily due to a decrease in amortization of intangible assets. Sales and marketing expense in the period was $26.9 million, representing an 11.5% decrease over the prior year. The $3.5 million reduction in spending was primarily driven by lower personnel-related and media advertising costs associated with our direct-to-consumer channel. And finally, we incurred $14.6 million for general and administrative expenses in Q2, representing a $1.9 million increase as compared to the prior period, driven primarily by a $2 million increase associated with the prior year benefit from a change in fair value of earn-out liability. As previously mentioned, we incurred $200,000 for restructuring charges as well as $500,000 in acquisition costs for diligence and legal activities associated with the Physio-Assist purchase agreement. This was partially offset by a decrease in personnel-related expenses. In the second quarter of 2023, we reported a net loss of $9.8 million and a loss per diluted share of $0.42. On an adjusted basis, we reported a net loss of $5.8 million and an adjusted loss per diluted share of $0.25. Adjusted EBITDA was a $3.2 million loss, a sequential improvement from the first quarter of 2023, which reported an adjusted EBITDA loss of $11.8 million. This improvement is correlated with increased revenues and cost-saving actions that we have taken in the first six months of the year. Moving on to our balance sheet. As of June 30, 2023, we had cash, cash equivalents, and marketable securities of $170.1 million with no debt outstanding. We continue to carry inventory of premium-priced components on four semiconductor chips purchased on the open market but not yet sold in finished goods. These items reside on the balance sheet as inventory and as prepaid expense and other current assets. As of June 30, 2023, the value of premium components in our inventory and prepaid balances was $8.6 million. Due to the lower forecasted sales volumes, we now expect the cost for premium price components to continue to impact cost of goods sold through Q4 2023 and potentially into early 2024. I will now turn to our financial outlook. As Nabil mentioned, we are updating our guidance to reflect our year-to-date results and have adjusted expectations based on the challenges we have encountered in our business-to-business channel as well as our direct-to-consumer channel. We now expect total company revenue for the full year 2023 to be in the range of $315 million to $320 million. Despite the large decrease in revenue, our recent cost reduction efforts will allow us to deliver an adjusted EBITDA loss in line with current Street expectations in the range of a $20 million to $25 million loss for the full year 2023. We remain focused on our return to profitability, and we will continue to actively manage our expenses for the remainder of the year. And with that, we will be happy to take your questions.

Thank you. Our first question comes from the line of Matthew Blackman with Stifel. Please proceed with your question.

Hi, this is Colin on for Matt. I just wanted to start with one on guidance. What does the guide imply in the broader context of your efforts to turn around the various business lines? Are things just moving slower than you guys anticipated? Or are you encountering new challenges that you may not have foreseen? For example, has anything changed regarding your rep productivity outlook? Thanks.

Thank you, Colin, I’ll take the question. So we are not seeing any new challenges, to your point. In terms of rep productivity, like we indicated, there is a very healthy productivity increase in Q2 versus Q1 in the direct-to-consumer channel as well as the prescriber channel. The challenges with respect to the new guideline mainly relate to business-to-business and a slower progress in terms of direct-to-consumer revenue generation. That is directly related to the lower number of people in the seats. As a reminder, we had focused on trying to achieve both growth and profitability in that channel. The progress is, albeit a little bit slower, but the productivity per rep is actually where we expected it to be and it’s very encouraging in that channel. From my perspective, the business-to-business challenges are a bit more pronounced even though there are some in direct-to-consumer, but the encouraging productivity indications are very positive for us.

Okay. And given those business-to-business dynamics you just mentioned, should we expect Q3 to take a step back from the second quarter for things to start getting a little bit back on track in the fourth quarter? Just what should we expect from a cadence standpoint there?

Yes. Potentially, there might be a small step back in Q3. Let me elaborate a little bit. As we work through some of the challenges, but also the opportunities with our large business-to-business customers, it might take a little bit longer than we expected. That’s why we have been very judicious about calling down the number. With that said, we are seeing good progress in the ability to win back some of the accounts that we had lost as well as promising progress in terms of winning new accounts. Some of the losses are in larger, more concentrated accounts, but there is nevertheless progress. We think it will take a little bit longer than we expected.

Okay. Thank you.

Thanks.

Our next question comes from the line of Robbie Marcus with JPMorgan. Please proceed with your question.

Hi. This is actually Lilia on for Robbie. Thanks for taking the question. Can you talk a little bit more about what you are seeing in direct-to-consumer? It sounds like productivity is improving. So, I guess headcount is really the issue there. So, when can we expect turnover to start stabilizing? And how are you thinking about the size of the sales force growing from here?

Yes. Thank you, Lilia. Just as a reminder, we used to be in the 300 range in terms of salespeople. We had indicated recently that we are going to be closer to the 200 range, give or take here plus or minus 10%. To your point, specifically, the productivity actually is very encouraging. It’s plus 30%, both in terms of unit productivity as well as revenue productivity per representative. The number of reps in the seats, naturally as you dial up the accountability and the new expectations, there is a little bit more churn than we had expected. But it’s not that all of it is regrettable. Regarding where we think this will stabilize, as part of our long-range plan early in 2024, we will give an indication of where we think that channel will be, but with that said, direct-to-consumer will always be part of our go-to-market strategy. It’s a unique channel that differentiates us. We are trying to get to the right balance between growth, but at the right price from a profitability perspective. Hence, we have a reduction in salespeople in the seats as well as a reduction in advertising spend in terms of the leads we generate and an effort to continue to compensate for some of that revenue through the increased productivity that we are seeing good progress on.

Got it. That’s helpful. And then just as a follow-up, can you give us an update on the state of the supply environment? Do you feel you have good visibility through the rest of the year? When do you think you can get back to normal ordering patterns with your suppliers? Thanks so much.

Yes. The state of the supply in general is trending normally. There are no huge lags, there are a few issues here and there with specific products that we are trying to source, but I would not characterize that as a major concern for us unless there is some material change moving forward, which we don’t expect to be. We are not in a supply-constrained environment in general.

Great. Thank you.

Thanks, Lilia.

Our next question comes from the line of Matthew Mishan with KeyBanc Capital Markets. Please proceed with your question.

Hi guys. This is Brett on today for Matt. Thanks so much for taking the questions. Wanted to start off with a question regarding the Rove 6 announcement this morning that you touched on during the prepared remarks as well. Just curious if you could walk through what’s changing around the value proposition given the extended service life. And as a follow-up there, does that mean that the product will now have an 8-year warranty? And does anything change around the economics for Inogen around average selling prices or warranty revenue, given the improvement there?

Yes. Thank you, Matt. I will take that question. Rove 6 is an update of G5, but it’s very important for us to actually think of it as the new platform for the innovation that we said is coming around 2024 in terms of a larger than six setting device. The improvements in this device are essentially through the user interface, alarming capability, and cannula placement. With that said, we also managed to achieve an 8-year expected service life, which is really critical. For B2B customers, thinking about the return on invested capital in the fleet of portable oxygen concentrators makes it very important to be able to buy a device that has an approved 8-year label versus a 5-year label. We are excited about the stronger value proposition we are trying to drive. To our knowledge, we don’t know of any other devices that have an 8-year expected service life in the marketplace. This applies both in the U.S. and in Europe. Regarding your other question about the warranty, we don’t have an intention to extend the warranty beyond the current 5 years; we will continue to service those devices after warranty expires and allow key large customers, as we do now, to service their devices by providing the right parts and service support.

Alright. Got it. That’s very helpful. And then just – this might be a little bit of a tough one to answer, but just trying to take a step back, can you touch on just from an underlying patient demand perspective, especially in the direct-to-consumer channel. Taking into account some of the changes in sales force levels, what can you say about just the level of demand, especially as we proceed into the summer months when you typically would see a step up? Are there any positive early signs you could point to that would give a little more positivity on what we might see into next year at a lower number of sales reps?

Yes. Brett, thanks for the question. Starting with the direct-to-consumer channel, we took price increases successively in the last 1.5 years. Despite this, through productivity and the ability to continue to serve the patients that don’t have any insurance-based coverage, we see that demand continues to be there despite the price increases, which were intended to price for value more than anything else. From a demand perspective, I don’t see any softness in that. Transitioning to the other part of the business, demand in business-to-business, in general, if you look at the prescription rates of people that are getting diagnosed and prescribed, it’s steady and recovering slowly. So, from the patient perspective, demand is there. What we saw in the quarter and in the preceding quarter is a little bit of softness in business-to-business customers' willingness, as we mentioned in the prepared remarks, to deploy capital, the cost of borrowing, and ensuring that they get a return on that capital. However, I would label it as transient in nature, where people are beginning to see a different way to look at this model. We believe demand will slowly return to normal levels in the business-to-business channel.

Alright. Thanks a lot for taking the questions.

No worry, Brett.

There are no further questions in the queue. I would like to hand it back to Mr. Shabshab for closing remarks.

Thank you. In the near term, we are focused on improving our commercial execution, strengthening our portfolio through innovation beyond COPD, and positioning the company for sustainable growth and profitability. Our transformational journey continues, and we remain committed to driving value for our patients, customers, and shareholders over the medium to long term organically and with an expanded portfolio, including airway clearance solutions. As I conclude, I would like to thank our investors for your support and interest in Inogen. I am extremely proud of the Inogen team’s collective effort to work through these short-term challenges while continually improving our execution and building needed capabilities. Fulfilling our purpose of improving patients’ lives through respiratory care while driving growth and eventually profitability remains an exciting true north for all of us. Thank you again, and enjoy your afternoon.

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.