Welcome to Inogen's Second Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded today, August 7, 2025. I would now like to turn the call over to Lorna Williams, SVP of Investor Relations and Strategic Planning.

Thank you for participating in today's call. Joining me are President and CEO, Kevin Smith; and CFO, Mike Bourque. Earlier today, Inogen released financial results for the second quarter of 2025. The earnings release is available in the Investor Relations section of the company's website, along with a supplemental financial package. As a result, the information presented today will include forward-looking statements, including, without limitation, statements about our growth prospects and strategy for 2025 and beyond, expectations related to our financial results for the third quarter and full year 2025, progress on our strategic initiatives, including innovation, our expectations regarding the market for our products and our business and supply and demand for our products in the short term and long term. The forward-looking statements in this call are based on information currently available to us as of today's date, August 7, 2025. 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 Securities and Exchange Commission. Actual results may vary, and we disclaim any obligations to update these forward-looking statements, except as may be required by law. During the call, we may 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 noncash 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, Kevin Smith.

Good afternoon, and thank you for joining our second quarter 2025 conference call. Today, I'll share more detail on our progress across our three strategic imperatives: driving top line growth, advancing our path to profitability, and expanding our innovation pipeline. Afterwards, Mike will provide further financial details and our updated outlook. First, advancing top line growth remains central to our purpose and goals. This quarter, we achieved our sixth consecutive quarter of mid-single-digit growth compared to the prior year, delivering approximately $92 million in revenue. We have continued to drive encouraging performance, resulting in unit growth of 19% in overall unit volumes as a result of continued market conversion from portable oxygen tanks to portable oxygen concentrators or POC. Inogen is in the early stages of a promising turnaround, driving top line growth. Disciplined execution has brought us to an inflection point regarding adjusted EBITDA positivity. We've established a track record of meeting or exceeding our financial goals as we advance our presence in the large growing COPD market with low POC penetration. In fact, over the next five years, POCs are expected to increase from an estimated 23% to 58% of the total ambulatory market in the U.S. Our strategy focuses on increasing patient access, leveraging our brand strength, and expanding our portfolio through new products, indications, digital capabilities, and geographic reach, which together provide us an opportunity to increase our addressable market. With these opportunities in front of us, we are confident in our ability to accelerate growth, enhance profitability, and drive long-term shareholder value. In the second quarter, we completed the rollout of our Patient-First initiative, which is a program based on the belief that any patients in need of oxygen therapy should be able to receive an Inogen device easily through the cross-training of sales representatives to execute both cash sales and insurance rentals. This marks an important step forward in strengthening our direct-to-consumer sales and rental channels. We are also seeing steady improvements in crucial metrics of sales team success. For example, close rates are already trending up as we continue to enhance our training programs, refine our commercial approach, and expand our product offerings. With our sales force size stabilized and the initiative now fully implemented, we expect to see more favorable year-over-year comparisons towards the end of the third quarter and remain focused on driving stronger performance across the sales organization. We added several new private payers during the quarter, reflecting our ongoing efforts to expand access and strengthen our rental business. Looking ahead, we remain focused on driving operational efficiency and further optimizing performance across our rental operations. In the quarter, we reported strong momentum in our business-to-business channels with growth of approximately 18%. The team has done an excellent job strengthening relationships with DMEs and winning tenders internationally. These results bolster our confidence in our total market approach and the strength of the Inogen brand. Turning to our second priority, driving profitability, where we continue to advance through operational excellence and disciplined cost management. In the second quarter, we delivered meaningful operating leverage, reducing operating expenses by approximately 5% year-over-year and generating $2 million in adjusted EBITDA. This was our second consecutive quarter of adjusted EBITDA profitability. It also marks the fourth adjusted EBITDA profitable quarter out of the last five, highlighting consistent execution of our strategies and disciplined expense management. As a result, we now expect to achieve full year adjusted EBITDA breakeven in 2025, supported by sustained revenue growth and disciplined spending. We remain focused on driving further improvements in the coming years as we advance towards sustainable profitability. We continued to advance our innovation pipeline this quarter with meaningful progress across our key strategic priorities. We introduced Voxi 5, our latest stationary oxygen concentrator designed to expand access to high-quality therapy for long-term care patients. We also continued development of clinical data for Simeox around the world and launched a new mobile digital health portal. I'll begin with Voxi 5, our newest stationary oxygen concentrator. This product is a meaningful extension of our oxygen therapy portfolio, complementing our portable solutions and enabling us to serve a broader range of patients in the home care setting. Developed in collaboration with UL Medical, Voxi 5 reflects the strength of our product pipeline and our ability to bring high-quality, cost-effective solutions to market. The device delivers 1 to 5 liters per minute of continuous flow oxygen in a compact, quiet, and durable form. It's a strong option for patients who need a reliable and affordable second unit for use in multiple rooms. The launch of Voxi 5 also gives our sales team another valuable tool to meet the diverse needs of patients and providers, especially in the business-to-business channel, where we previously did not have a stationary offering. This is critical as our DME partners generally provide new patients with both SOC and POC and having two quality offerings will allow us to reach new customers and deepen our relationships with existing partners. We're encouraged by the early response and look forward to continued progress as the launch builds momentum in the months ahead. In addition, we initiated the groundwork for our clinical trials to support premium reimbursement, advancing our efforts towards Simeox commercialization. While there are no material updates to provide at this time, the overall efforts remain on track, and we will continue to share pertinent information as appropriate. Lastly, we enhanced our digital health capabilities by launching an online patient portal as part of our Inogen Connect solution. The patient portal is designed to be seamlessly integrated with our mobile application, expanding access to self-service tools that improve patient engagement and streamline operations. The platform enables patients to order supplies, track shipments, access setup resources, update insurance info, and e-sign forms, all from their phones or computers. The launch supports our commitment to enhancing patient experience. We are pleased with the positive reception by early adopters and look forward to continuing to deliver tools that improve accessibility and ease of use for patients and providers. To conclude, the innovation we delivered this quarter reflects our ongoing commitment to advancing respiratory care through meaningful product development, greater affordability, and better outcomes for patients who rely on oxygen therapy every day. With that, I will pass the call over to Mike for an overview of our financials.

Thank you, Kevin, and good afternoon, everyone. Unless otherwise stated, all financial comparisons presented refer to the prior year comparable period. Total revenue for the second quarter of 2025 was $92.3 million, an increase of 4% on a reported basis. The increase was primarily driven by higher demand in our business-to-business channels. Looking at second quarter revenue on a more detailed basis. Domestic business-to-business revenue increased 19.3% to $25.4 million versus $21.3 million in the prior period, driven by increased demand. International business-to-business revenue increased 17.7% to $35.9 million compared to $30.5 million in the prior period, primarily driven by higher demand. Direct-to-consumer sales decreased 21.1% to $17.8 million from $22.6 million in the prior period as we continue to operate with a smaller and more efficient team. We've taken meaningful steps over the last 12 to 24 months to reshape our DTC operations, focusing on efficiency and productivity to support our broader profitability goals. These changes helped drive nearly 19% sequential growth in our DTC channel, nearly double the 10% sequential improvement from the prior year. This improvement strengthens our belief that our current team operating with an updated structure is well positioned for the future. Rental revenue decreased 8.6% to $13.1 million from $14.3 million in the prior period. The decrease was primarily driven by a higher mix of lower private payer reimbursement rates. Now on to discuss gross margins. Total gross margin was 44.8% in the second quarter of 2025, decreasing 335 basis points from the same period in the prior year, primarily driven by increased business-to-business sales as a percentage of total revenue. On a sequential basis, gross margin increased 60 basis points, driven by higher volumes. Our cost of goods sold in the quarter included premium priced components, which resulted in a 121 basis points headwind to gross margin. We do not expect a material impact from these components going forward. Moving on to operating expense. In the second quarter of 2025, total operating expense decreased to $47.5 million compared to $49.8 million in the prior period, representing a decrease of 4.7%, primarily related to a one-time bad debt expense in the prior period. Due to the timing of planned expenses for advancement of clinical trials related to Simeox commercialization, we expect operating expense to slightly increase in the second half as compared to the first half of the year, reflecting ongoing investments in product development and commercialization. In the second quarter of 2025, we reported a GAAP net loss of $4.2 million compared to a loss of $5.6 million in the prior period and loss per diluted share of $0.15 in the second quarter of 2025 versus a loss of $0.24 in the prior period. On an adjusted basis, we had a net loss of $700,000 in the second quarter of 2025 compared to a loss of $1.6 million in the prior period and an adjusted loss per diluted share of $0.02 in the second quarter of 2025 compared to a loss of $0.07 in the prior period. Adjusted EBITDA was $2.1 million in the second quarter of 2025 compared to $1.3 million in the prior period. Moving on to our balance sheet. As of June 30, 2025, we had cash, cash equivalents, marketable securities, and restricted cash of $123.7 million with no debt outstanding. We were pleased to increase cash by $1.2 million in the quarter. We also generated $4.4 million in operating cash flow in the second quarter, a testament to the health of our business and a result of our focus on working capital optimization and expense management. On that note, I will now discuss our full year 2025 and third quarter financial outlook. We now expect full year 2025 reported revenue to be in the range of $354 million to $357 million, reflecting 6% growth at the midpoint relative to the full year 2024. For the full year 2025, we now expect to reach adjusted EBITDA breakeven. For the third quarter 2025, we expect reported revenue to be in the range of $91 million to $93 million, reflecting 4% growth at the midpoint relative to the third quarter of 2024. Given our current exemptions for certain medical devices, we continue to expect no material impact from tariffs on our gross margin and adjusted EBITDA. However, we will closely monitor developments, and we'll share updates as appropriate. Our turnaround is progressing well with mid-single-digit top line growth and disciplined execution. These results highlight the strength of our strategy and position us to drive sustainable performance and create long-term shareholder value.

Thank you, Mike. We're proud of the progress made this quarter as we sharpened our focus on operational discipline, launched new products, and advanced our innovation efforts. The introduction of Voxi 5 opens new doors in stationary oxygen therapy, and we continue to lay the groundwork for future growth through investments in digital health and our broader innovation pipeline. With a solid foundation in place, we're entering the second half of the year with confidence and a clear path forward. With that, operator, please open the call for questions.

And our first question comes from the line of Anderson Schock with B. Riley Securities.

Congrats on a really strong quarter. So first, could you talk about the initial demand you've seen for Voxi 5? How should we think about the revenue contribution for this in the back half of the year? And what percent of new Voxi 5 users are also being prescribed one of your POCs alongside it?

Mike, I'll go ahead and start with that. Thanks, Anderson, and I appreciate the comment there, too. When we look at Voxi 5, so we just launched that, of course, as you're here recently, and we're excited with what we've seen so far from that. It's baked into our guidance for the rest of the year. We do see opportunity for that to have an impact more in the fourth quarter than it would earlier, but that is baked into the guidance that we have already provided. But I think it's one thing that's important to note when you ask about the market for that and what the contribution will be for the company going forward. When we look at the patients that have a portable oxygen concentrator versus a stationary concentrator, look at that population that has long-term oxygen, nearly 100% of those, over 90% certainly have an SOC. So that is nearly every patient that's on long-term oxygen therapy. Portable oxygen concentrators are used with about 23% of that population. So it is a significant increase in our addressable markets that Voxi 5 brings for us. So that is something as we look at going forward and we look at our path towards double-digit growth and sustainable profitability, that represents a significant uplift for us in the future.

Okay. Got it. That's helpful. And then do you have any updates on the reimbursement for Simeox? And how should we think about this impacting the timing of a full commercial launch?

Yes, we are actively working on the reimbursements for Simeox. We have several processes in place to generate the necessary health economic and clinical data to ensure we maximize reimbursement. Our focus is not limited to the United States, as we are also looking at opportunities globally. We have international trials underway to support our presence in Europe and other markets, and we are tracking these developments closely. While we haven't provided external guidance on specific timing, we are pleased with our progress. Looking ahead, Simeox represents a significant opportunity for us as we aim to expand our pipeline. The standard of care is our first chance to extend beyond portable oxygen concentrators on a larger scale rather than targeting niche segments. With Simeox, we see it as a high-margin product model, and we look forward to that potential. We will share more guidance on timing when the moment is right.

And our next question comes from the line of Robbie Marcus with JPMorgan.

This is actually Rohin on for Robbie. I just wanted to start with guidance. You raised the guide by the size of the beat, and I was hoping you could provide some segment-level commentary just for the balance of the year and how you're thinking about the fundamentals.

Sure, Rohin. I'll take that. This is Mike. I think the best way maybe to explain guidance really talk a little bit about what our rationale was as we entered into this second half of the year. So if you look at second half growth is expected to be 7% at the midpoint of the guidance, and that would be with mid-single-digit revenue growth in Q3 and low double-digit revenue growth in Q4. Historically, Q2 and Q3 have been our strongest quarters with Q3 revenue roughly in line with Q2 and our outlook reiterates that trend. I think we've said before that in Q4, we expect to have lapsed the year-over-year sales force changes in our D2C business. So we expect to see performance stabilizing in the fourth quarter. We do continue to expect B2B growth. And as Kevin alluded to earlier, we talked about the Voxi as not being significant to our 2025 results being more meaningful in '26 going forward, but we do expect some level of contribution from the Voxi launch, and that's what's driving that double-digit overall Q4 growth.

Got it. That's helpful. And then I had a follow-up just on adjusted EBITDA and profitability. You guided to breakeven for the year. And I also believe that I heard positive cash flow from operations in the quarter as well. So maybe if you could talk more about some of the drivers behind profitability and your outlook as well as some of the working capital adjustments. And when should we expect for the company to reach free cash flow breakeven?

Our focus has been on profitability, and we've been discussing this for quite some time. The second quarter marked our second consecutive quarter of positive adjusted EBITDA as we execute our strategy. We are very pleased with our profitability progress, having reported positive adjusted EBITDA in four of the last five quarters. This is an opportune time to discuss profitability metrics such as operating income, adjusted operating income, net income, adjusted net income, EBITDA, and adjusted EBITDA. These metrics have all shown favorable results for every quarter over the past year and a half compared to previous periods. We are satisfied with our execution on this priority and our path to profitability. Regarding cash, we are pleased to have generated $1.2 million in cash during the second quarter. We also generated about $4.5 million from operations and roughly $0.5 million of positive free cash flow. While we haven't provided guidance on future cash forecasting, we will continue to monitor our cash balance and capital allocation, focusing on the strategic needs of our business while balancing an adequate cost structure and investing in areas with favorable returns. Overall, we are comfortable with our current cash position and our ability to support all aspects of the business as necessary.

And our final question comes from the line of Mike Matson with Needham & Company.

So another one on Voxi 5. Just wondering, can you comment at all on the pricing and gross margins of that product and particularly interested in how it compares to the POCs? Is it substantially above or below POCs on either of those metrics? And if you can give us more specifics, that would be helpful. But...

Yes. I think, Mike, we don't provide guidance on revenue per channel or expected margins. Our reporting focuses on gross margin derived from sales and rentals. We prefer not to specify gross margin expectations for that product since it varies across our other products and channels. For instance, in direct-to-consumer, we analyze the price of selling one unit to an individual patient compared to selling hundreds of units to a B2B customer, which results in different pricing and consequently, different gross margins. We see the Voxi 5 as a way to enhance all those channels.

Yes. I want to emphasize that we see this as a crucial element on our journey to profitability. As Mike mentioned, we analyze various segments and see how the Voxi 5 integrates into each of them. It presents an opportunity to enhance our profitability in the rental channel and provides our sales team the chance to offer an Inogen package to patients instead of just the Inogen POC along with a different stationary concentrator. For the direct-to-consumer channel, this represents a higher-margin sale, as Mike indicated, even though we have not specified the figures. We are pleased with the initial results from launching the Voxi 5, as we are successfully selling it to patients for cash through our direct-to-consumer channel. This translates to more sales per patient, increased revenue, and a sustained opportunity for growth. Moreover, it's essential to note that we are addressing the same patient, physician, and customer in our B2B channel, utilizing the same sales representative. This allows us to effectively leverage our existing organization and brand.

Yes. Okay. That all makes sense. And then I thought I heard something in the prepared remarks when you were talking about operating expenses, correct me if this is wrong, but I thought I heard that there was a mention of a Simeox trial or something. Is that right? And I guess why are you running the trial? Is it to support the marketing of the product to support reimbursement of the product or clearance or something else or...

Yes, thanks for the clarification. We have trials underway both in the United States and internationally that are focused on reimbursement. This involves developing the health economic data necessary for the value dossier to support reimbursement, as well as conducting trials aimed at increasing acceptance and developing marketing claims. There are various aspects to consider. We are pleased with the data we’ve been observing and the feedback we’ve received. Specifically, the trials I'm mentioning in the United States are geared towards creating health economic data that supports reimbursement.

Okay. Got it. And then just wondering where things stand with developing or maybe enhancing is a better word, your kind of connectivity features on your products? Because it seems like there could be some synergies there now that you have the SOC and the POC where if they were both Internet connected and using the same kind of software platform to track location, maintenance, et cetera, for the DME customer as well as for the patient having their own sort of data in there that, that could kind of sort of tie those products together better and create a more stickiness between them where if you're buying one, you want to buy the other one.

I couldn't agree more. You're absolutely right. When we assess our connectivity and digital health, we're developing an ecosystem that aims to enhance brand preference and loyalty. This adds value back to our B2B customers by enabling them to monitor device health and evaluate devices in the field as they receive inquiries from patients. Additionally, we are focused on facilitating easier access for patients to information and supplies, which contributes to the overall value we provide. Our goal extends beyond the current technology in use; we aim to integrate future innovations into the same ecosystem and connect them through our applications.

And with that, there are no further questions at this time. I would like to turn the call back to Kevin Smith for closing remarks.

Thank you. And I'd like to take a minute here and reinforce some previous points. Our second quarter represented another strong step forward in executing our strategic priorities and delivering solid financial performance. With significant opportunities ahead, we remain confident in our ability to accelerate revenue, enhance profitability, cash flow and drive long-term value for our shareholders. This quarter marks our sixth consecutive period of year-over-year mid-single-digit top line growth, fueled by continued strength across both our domestic and international business-to-business channels. We also made meaningful strides in profitability, achieving our second consecutive quarter and fourth quarter out of the last five of positive adjusted EBITDA while generating $1.2 million in cash. These are important milestones in our path to sustained profitability. The successful launch of Voxi 5 expands our SOC portfolio and improves access to high-quality oxygen therapy for long-term care patients. We also advanced our digital health capabilities and made important progress towards the commercialization of Simeox. And as we look ahead to the second half of 2025, we remain focused on disciplined commercial and operational execution. We're encouraged by the momentum across the business and excited about what's to come. And I'm proud of the team's commitment and excellent performance during the first half of the year. Looking ahead, I'm confident in our collective ability to meet our financial goals. Our ongoing efforts to drive revenue growth, enhance profitability and expand our innovation pipeline position us well for continued progress in the second half of the year. But before we conclude, I want to take a moment and thank the incredible team at Inogen. Your dedication, resilience, and passion for improving the lives are what drives our success. Every milestone we've reached this quarter is a direct reflection of your hard work and commitment. Inogen is more than a company. It's a community of innovators, caregivers, and problem solvers. It's a place where people come to make a difference, and I'm proud to say it's a truly great place to work. So thank you for all that you do. We look forward to continuing this journey together.

Thank you. And with that, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.