Earnings Call Transcript - INGN Q1 2026

Operator, Operator

Welcome to Inogen's First Quarter 2026 Earnings Conference Call. (Operator provided instructions for the conference call.) As a reminder, this conference is being recorded today, May 7, 2026. I would now like to turn the call over to Lorna Williams, SVP of Investor Relations and Strategic Planning.

Lorna Williams, SVP, Investor Relations and Strategic Planning

Thank you all for participating in today's call. Joining me are President and CEO, Kevin Smith; and CFO, Jason Richardson. Earlier today, Inogen released financial results for the first quarter of 2026. The earnings release is available in the Investor Relations section of the company's website at investor.inogen.com, along with the supplemental financial package. During today's call, we will discuss non-GAAP financial measures that we believe provide useful supplemental information for investors. This information is not intended to be considered in isolation or as a substitute for GAAP financial information. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental financial package, each of which is available in the Investor Relations section of our website. In addition, our discussion today will include forward-looking statements, including, but not limited to, expectations about our future financial and operating performance. We make these statements based on current expectations and reasonable assumptions. However, our actual results could differ due to risks and uncertainties. Please review our annual report and other SEC filings for a discussion of risk factors that could cause our actual results to differ materially from any forward-looking statements made today. Forward-looking statements made on today's call speak only as of today, and Inogen undertakes no obligation to update or revise these statements, except as required by law. With that, I will turn the call over to Inogen's President and CEO, Kevin Smith.

Kevin Smith, President and Chief Executive Officer (CEO)

Good afternoon, and thank you for joining our first quarter 2026 conference call. I want to begin by welcoming several new leaders to the Inogen team. These team additions reflect the ambition we have for the next chapter. Jason Richardson joined us as Chief Financial Officer this quarter. Jason has over 25 years of experience, mostly in large complex global medical device companies with significant leadership experience across finance and a track record of delivering results. He brings the operational depth that we need, has experience scaling med tech franchises and has respiratory industry experience, all directly relevant to what we are building. I'll let him speak to the quarter shortly. We also appointed Dominic Houlton as Chief Marketing Officer, reporting directly to me. As we operate across oxygen therapy, sleep and airway clearance, the work of building a coherent brand and a disciplined go-to-market approach across multiple disease states and channels has grown considerably in scope. Dom brings the commercial experience and strategic instincts that this moment calls for. And we announced the appointment of Vafa Jamali to our Board of Directors, which will become effective on June 5, 2026. Vafa's background spans revenue growth, commercial strategy and capital allocation. These perspectives will be valuable as we work to translate our portfolio expansion into durable financial performance. In connection with our upcoming annual meeting, the Board is asking for shareholder approval to declassify its members, starting the process with the annual meeting in 2027. This is an important step to align our governance with the long-term interests of our shareholders. Turning to Q1 results. Q1 came in at $85.1 million in total revenue, representing 3.4% year-over-year growth ahead of our expectations. When we set guidance, we were transparent about what was shaping the quarter: continued strength in international, along with channel mix pressure as the U.S. market continues its structural conversion towards portable oxygen concentrators (POCs). Those dynamics played out largely as anticipated with unit volumes growing 14% year-over-year, and our international business delivered double-digit performance. Taken together, the quarter reflects a business performing in line with our expectations and underlying fundamentals that remain healthy. U.S. sales were $34.7 million in the quarter. Today, we estimate roughly 60% of new long-term oxygen therapy patients start in a POC, up from under 40% just a few years ago. That shift benefits our B2B sales channel meaningfully, and we see it in our volume. It does, however, create a headwind in our direct-to-consumer and rental channel where patients historically came to us seeking an alternative to the oxygen tank their HME had provided. We are managing this transition with discipline. Our direct sales rep efficiency continues to improve. Demand for Inogen products is strong. We're investing deliberately to educate both patients and providers on the economic and clinical benefits of Inogen technology. Our Rove 4 and Rove 6 POCs carry an 8-year useful life versus the 5-year useful life of other POCs in the market, best-in-class serviceability and a growing body of outcomes data. That performance supports our premium positioning against pricing pressure. International sales were the clear standout in Q1. Revenue of $37.7 million represented 18% year-over-year growth. This result speaks to the quality of our commercial execution and the breadth of the opportunity ahead. Our teams have deepened relationships with key HME partners, secured important international tenders and continued expanding into new geographies, including Eastern Europe, Latin America and the Asia Pacific region. The global COPD market is large, under-penetrated and shifting steadily toward home-based care. We are well positioned and Q1 international performance is evidence of this. If the financial results reflect where we have been, the pipeline is where I want to spend most of my time because it tells you where we are going. When I joined Inogen, we were a portable oxygen concentrator company with a $400 million addressable market. Today, we operate across oxygen therapy, sleep therapy, airway clearance and digital health with an estimated combined total addressable market of over $3.4 billion. That expansion is the result of a deliberate strategy: identify adjacencies with patient overlap, enter with clinical evidence and leverage the commercial infrastructure and brand trust that we have built. Each new category we have entered follows that same logic. Now let me walk through the major milestones from this quarter. We launched the Aurora CPAP mask family in the United States this quarter, and the early read is highly encouraging. I want to be clear about why we entered this market and why we believe we can win. First, roughly 20% to 30% of our COPD patients have obstructive sleep apnea. These patients are managed by the same pulmonologists and respiratory therapists and are served by many of the same HMEs we work with every day. The channel relationships we have spent years building extend naturally into this market. What gives us particular confidence is the clinical work we completed before launch. We ran a 90-day in-home evaluation with experienced CPAP users. These individuals were already satisfied with their existing mask, yet they preferred the Aurora mask, particularly the Aurora full face mask, which was overwhelmingly favored. That is a meaningful bar to clear, and we did it. We will be presenting the full results of that study at Sleep 2026 in Baltimore this June, one of the premier forums in sleep medicine. Presenting a peer-reviewed data set at this type of industry conference is how a new entrant like us builds credibility with clinicians and accelerates adoption through the HME channel. The early commercial feedback has been encouraging. HME partners and respiratory therapists have responded positively to the product and to the evidence behind it. We expect Aurora's revenue contribution to be more back-half weighted as that momentum builds. We estimate the U.S. CPAP mask market at approximately $2.2 billion, growing at a high single-digit rate. So every point of market share represents roughly $20 million in potential annual revenue for Inogen. We intend to earn a meaningful position in this market, and Aurora is the foundation for that. We also launched the Rove 6 portable oxygen concentrator in Brazil this quarter. This reflects the broader international expansion strategy we have been executing. We are entering new geographies with products designed for those markets, building on our established distribution relationships and extending Inogen's reach to patients who currently have limited access to high-quality portable oxygen therapy. Brazil is a meaningful market with a growing COPD patient population, and this launch continues the momentum we have built across Latin America over the past year. Simeox represents what I believe is one of the most exciting long-term opportunities in our portfolio. In this quarter, we crossed major milestones. We began patient enrollment in IMPACTS-200, our first reimbursement trial for Simeox. The trial is actively enrolling. We want to build the right evidence base to address CMS, private payers and health economic arguments for appropriate reimbursement levels. Let me remind everyone of the opportunity here. The U.S. opportunity for Simeox is an estimated $500 million TAM in non-cystic fibrosis bronchiectasis, growing at a high single-digit rate. The device carries an attractive gross margin profile and the disposable component creates a recurring revenue stream that makes the financial model increasingly predictable over time. And beyond the economics, Simeox addresses a patient population that is underserved. Existing OPEP devices are ineffective for a large share of bronchiectasis patients. Vest therapy works, but is bulky and not universally accessible. Simeox offers meaningful clinical differentiation and the data we are generating is designed to demonstrate that rigorously. These are the reasons why we are taking the time to do this right. Stepping back, the common thread across everything we discuss today is that the new Inogen is different from the Inogen of three years ago. We are a home respiratory care platform with a diversified portfolio and expanding addressable market with a commercial infrastructure and brand reputation that creates leverage as we scale each new product category. Strategically, we expect these investments in our pipeline to help drive our top-line growth and advance our path to profitability. POC remains our core business and foundation. We believe we have the best durability, the longest useful life and the deepest evidence base in the category. And we are building out the clinical, commercial and connectivity capabilities to keep widening that competitive moat, but we are no longer constrained by that single market. The new products we have launched are primarily in higher-growth markets with higher gross margin profiles than our historical mix. Going forward, we have committed to at least one new product launch each year, and each launch will be held to the same standard. The trajectory we have seen gives us confidence that we are on the right path. And with that, I will turn the call over to Jason for his first earnings call as Inogen's CFO. Jason?

Jason Richardson, Chief Financial Officer (CFO)

Thank you, Kevin, and good afternoon, everyone. I'm excited to be here for my first earnings call as Inogen's CFO. I joined the company just one month ago, and I've been spending that time getting deeply into the business and getting to know the team and the opportunities ahead. What I have found reinforces why I joined. We have a strong foundation and brand, opportunities to grow and an organization that is leveraging the strength of the legacy team while building out new capabilities to support our strategy. With that, I'll turn to our first quarter performance and the outlook ahead. As Kevin mentioned, total revenue for the first quarter was $85.1 million, an increase of 3.4% from the prior year period. This exceeded our expectations. Total sales revenue for the quarter increased by 5.7% and was primarily driven by higher growth in international POCs and favorable foreign exchange rates, which more than offset lower U.S. sales. For the quarter, foreign exchange had a positive 460 basis point impact on total revenue. U.S. sales were $34.7 million, down 5% year-over-year, and international sales were $37.7 million, up 18% year-over-year and more than offsetting a strong performance in the first quarter of last year, including the impact of large stocking orders. U.S. rentals were $12.7 million, down 8% year-over-year. Both U.S. direct sales businesses were impacted by the continued channel mix shift and reduced patient counts Kevin described. Moving to adjusted gross margin: in the first quarter it was 44.7%, an increase of 30 basis points from 44.4% in the prior year period, primarily the result of cost improvements. Expanding gross margin over time is critical to our overall profitability goals, and we are pleased with the first quarter performance. Adjusted operating expenses for the first quarter of 2026 were $43 million, an increase of 5.1% from $40.9 million in the prior year period. Adjusted R&D expense in the quarter was $4.1 million, an increase of $0.9 million versus the prior year as we are investing in clinical evidence generation and new product development that we believe will differentiate Inogen over the long term. Adjusted SG&A in the quarter was $39 million, an increase of 3.1% versus the prior year, driven by commercial organization investment to support the new product launches and the timing of advertising spend. GAAP net loss for the first quarter of 2026 was $8.3 million compared to a GAAP net loss of $6.2 million in the prior year period. Adjusted net loss was $4 million compared to an adjusted net loss of $2.9 million in the prior year. Adjusted EBITDA was a negative $1.4 million in the first quarter compared to approximately breakeven in the prior year period. The increase in losses year-over-year is a direct result of the timing of planned incremental R&D and commercial investments mentioned earlier. Looking forward, we expect Q2 and Q3 to be our strongest quarters for profitability, in line with our historic top-line seasonality, and we continue to expect adjusted EBITDA growth for the full year. Moving to cash. We ended the quarter with $111.5 million in cash, cash equivalents, marketable securities and restricted cash with zero debt outstanding. During the quarter, we began execution of our stock repurchase program. We purchased approximately 298,000 shares of our common stock for consideration of nearly $1.9 million. We continue to believe our stock is undervalued relative to the fundamentals and the strategic opportunity in front of us. Returning capital to shareholders while also investing in growth is something we believe we are well positioned to do, and we intend to continue to do it thoughtfully over the course of the program. Now let me turn to our second quarter and full year 2026 outlook. We are reaffirming our 2026 revenue guidance of $366 million to $373 million, representing approximately 6% growth at the midpoint. That guidance reflects continued trends in our core POC business, a growing contribution from international sales, the scaling of Aurora and Voxi 5, particularly in the second half, partially offset by continued mix pressures in our D2C and rental channels. For the second quarter of 2026, we expect reported revenue in the range of $94 million to $97 million, reflecting approximately 3.5% growth at the midpoint of the range relative to the second quarter 2025 revenue. Regarding profitability, we remain committed to driving adjusted EBITDA improvement for the full year 2026, following the positive adjusted EBITDA achieved in 2025. With that, I will turn the call back to Kevin for closing remarks.

Kevin Smith, President and Chief Executive Officer (CEO)

Thank you, Jason. We're executing against the plan we laid out. We're launching new products into larger, higher-growth markets, building the clinical and commercial infrastructure to support them and managing the P&L with discipline while continuing to invest in the long term. We've also strengthened the organization with new leadership across finance, marketing, the Board and a commercial team that is focused on execution. I am optimistic about what the next few years hold for Inogen. To our shareholders, thank you for your continued support and confidence in us. We look forward to updating you throughout the year. Operator, please open the call for questions.

Operator, Operator

(Operator provided instructions for asking questions.) We'll take our first question from Anderson Schock with B. Riley Securities.

Anderson Schock, Analyst, B. Riley Securities

Congrats on the quarter. So first, on the Rove 6 launch in Brazil, could you frame the size of the Brazilian COPD market and the current state of POC penetration? Is this largely an oxygen tank replacement opportunity? Or are you stepping into an established POC market?

Kevin Smith, President and Chief Executive Officer (CEO)

Anderson, this is Kevin. Thanks for the call. We have not quantified the size of the market in Brazil. It is an emerging market opportunity for us. There is an existing population of tanks in Brazil as well as POCs. There are other POCs in the market, so we're not the first entrant, but we are entering as the premium brand in Brazil. We have partnerships with local HMEs that also operate in other markets who are familiar with us and know how to position the Inogen brand. We're looking forward to the growth coming out of there, but this is one that will continue to develop over time as market access evolves.

Anderson Schock, Analyst, B. Riley Securities

Okay. Got it. And then net rental patients at the end of the first quarter had a steeper decline than the recent trends. Could you walk us through what drove the acceleration this quarter and how we should be thinking about this channel through the remainder of the year?

Kevin Smith, President and Chief Executive Officer (CEO)

Yes. When we look at the rental program, we view the dynamics as part of the broader market transition from oxygen tanks to POCs in the U.S., which is where rental largely originates. That shift creates a headwind for both direct-to-consumer and rental patients, even as it creates a tailwind for our B2B channels by increasing pull-through for other technologies. The effect is that rental patients declined more steeply this quarter as we see the conversion occurring. We are managing this carefully: improving rep efficiency, investing in education for patients and providers, and leaning into attachments across product lines like Aurora, Voxi 5 and, in time, Simeox to drive downstream revenue. We do expect overall U.S. growth toward the back half of the year, but we expect pressure to continue in the rental channel through the near term.

Anderson Schock, Analyst, B. Riley Securities

Okay. Got it. And then how is the early 2026 Voxi 5 ramp tracking against your expectations? And are you beginning to see pull-through benefits with HMEs that are bundling Voxi 5 alongside the POC?

Kevin Smith, President and Chief Executive Officer (CEO)

Yes, we are. We like the signs that we're seeing so far in the market. The feedback has been very good. We are seeing pull-through and attachment rates, so this is lining up with our expectations and supports the view that we have for this in the long term.

Operator, Operator

And next, we'll move to Mike Matson with Needham & Company.

Michael Matson, Analyst, Needham & Company

I guess I'll start with a couple of macro ones. So just wanted to get your take on the impact of kind of the elevated oil prices that we're seeing. Any material impact expected there? And then I wanted to see if you have any sales into the Middle East. I know you're selling in Europe; I didn't know if that included the Middle East. And if so, how significant is that?

Kevin Smith, President and Chief Executive Officer (CEO)

Mike, thank you for the question. Again, I'll start and then Jason, if there's anything to add, please do. From a macro level with the impact of oil, we're not seeing anything for ourselves that is outsized from the rest of the industry. There are some implications, particularly surcharges for logistics, but it's less of an impact for us than perhaps some others. If this carries on, we may start to see more impact as the year goes through, but to date it's not a significant piece. When you also look at petroleum-based components and products, we do have some resin material in our POCs. However, we have supply agreements in place that protect us in the near term. We wouldn't expect to see an impact unless this persists beyond a quarter. If we start seeing this continue throughout the year, we may see additional impact from that. For the business in the Middle East, yes, we do have business there. The majority of our international business still comes from the European markets. We are not impacted by current geopolitical issues yet. We have been focused on making sure that we can continue to serve our patients and ensure that our team and partners are safe, which they are. So far, this hasn't been a negative impact. Jason, anything else there?

Jason Richardson, Chief Financial Officer (CFO)

No, I think that's right. As we've scenario-planned for current oil prices, we feel that because of timing and our limited freight exposure, we would expect to be able to offset current levels for 2026.

Michael Matson, Analyst, Needham & Company

Okay. Got it. And then wondering if you could give us an update on the CPAP mask launch. How is that going? And what kind of feedback are you getting from customers?

Kevin Smith, President and Chief Executive Officer (CEO)

Yes, Mike, it's been very good for us. It's meeting and exceeding expectations, especially in these early stages as we introduce the Aurora mask to the market. We were able to come to market with clinical data that supports patient preference and the quality of the mask, which gives us a leg up for early adoption. One of the things we've liked so far is extremely high reorder rates from customers that have started the process with Aurora: they take samples, start to get patients on them and then place repeat orders. We've seen those reorder rates coming in on a monthly basis at a very high level. That tells us the product is sticky, and this is a good signal for us.

Michael Matson, Analyst, Needham & Company

Okay. Got it. And then just looking at your adjusted net loss, if I'm remembering correctly when I glanced at the press release, it was flat to maybe even down from last year on an adjusted basis. I know EBITDA was not the same, but can you maybe just talk about what's happening there and why you weren't getting more kind of leverage or cost savings from an OpEx perspective?

Jason Richardson, Chief Financial Officer (CFO)

Yes, I'll take that one. I think what happened is that in the first quarter we accelerated some of our clinical evidence investments, particularly around Simeox. We also moved forward the timing of some advertising spend to try to generate additional business over the back half of the year. As we've mentioned before, we're managing OpEx to make sure that we end up in a position of growing EBITDA over the course of the year.

Michael Matson, Analyst, Needham & Company

Okay. Got it. And then the advertising—yes, go ahead, sorry.

Jason Richardson, Chief Financial Officer (CFO)

No, I was going to say the other thing I would highlight is the gross margin expansion we discussed in the prepared remarks, which I think is really critical for us as we think about some of the mix pressures we see in the market. Some of the other levers we're pulling to improve margins and to leverage the volume that we're seeing are really important to us moving forward.

Michael Matson, Analyst, Needham & Company

Okay. Got it. The advertising spending that you mentioned, is that geared at the consumer business? Or is that geared at the B2B side of things?

Kevin Smith, President and Chief Executive Officer (CEO)

Yes. The advertising spend has historically been geared more towards the direct-to-consumer business, although it does benefit broadly across all of our markets by creating brand awareness. We have been revising that strategy—how we allocate channels and execute marketing—and are broadening it to include healthcare providers and HMEs. This is a more sophisticated marketing approach going forward. One of the benefits of adding Dominic to the team is that he brings a lot of expertise and savviness to that effort.

Operator, Operator

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

Kevin Smith, President and Chief Executive Officer (CEO)

So before we wrap up, I want to highlight one core theme that underpins our strategy: innovation, which is the engine driving our future growth. Early feedback on our new products—Aurora, Voxi, Simeox—has all been positive, confirming these innovations address key market needs. This progress stems from strategic investments in our pipeline, and we aim to launch one new product per year as part of our long-term plan. These efforts strengthen our position for broader reach and sustained growth. While we are still early in this journey, the momentum we are building today gives us real confidence and excitement about what lies ahead. I would also like to formally recognize and express my gratitude to the entire Inogen team. Your dedication to patient care, consistent execution and collective contributions has been essential to our ongoing transformation. I value the energy and commitments you bring every day, and I'm proud of what we've built together. Thank you.

Operator, Operator

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.