Welcome to Inogen’s Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, we will hold a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded today, February 25, 2025. I would now like to turn the call over to Ryan Peterson, Investor Relations.

Thank you all 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 fourth quarter and full year 2024. The earnings release is 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 2025 and beyond; expectations related to our financial results for the first quarter and full year 2025; progress of our strategic initiatives, including innovation; our expectations regarding the market for our products, and our business and supply and demand for our products in both 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, February 25, 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 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, Kevin Smith.

Good afternoon and thank you for joining our fourth quarter 2024 conference call. During today’s call I will review our fourth quarter and full year performance and provide an update in our progress towards our three strategic priorities driving top line growth, advancing our path to profitability and expanding our innovation pipeline. I will then turn the line to Mike for a full review of our financials and outlook. 2024 was a year of progress at Inogen. We made significant steps forward on our strategic initiatives. We returned our company to growth, advanced toward profitability, launched our latest POC, the Rove 4, and received FDA clearance for the Simeox device in the United States. Before I share more on our 2024 achievements, I’d like to highlight an exciting recent announcement, a collaboration and investment from Yuwell Medical, a leader in the global respiratory care market. We entered into this collaboration in January 2025. As part of the agreement, Yuwell would distribute Inogen portable oxygen concentrators under the Inogen brand in China, expediting our entry into the large and fast growing Chinese respiratory market. In addition, we will distribute their stationary oxygen concentrators under the Inogen brand in the United States. We are happy to announce the transaction closed on February 21, 2025 alongside our commercial collaboration, a wholly-owned subsidiary of Yuwell invested approximately $27 million into Inogen, representing a 9.9% ownership stake. This is valuable additional capital for our use in support of our growth objectives. Over time we believe this collaboration and investment will allow us to broaden our product portfolio and meaningfully expand our global reach in support of long-term growth and profitability. Turning back to our 2024 accomplishments, for the full year we delivered over $335 million in revenue representing 6.4% growth over the prior year. In…

Thank you, Kevin. And good afternoon everyone. Unless otherwise noted, all financial comparisons are to the prior year comparable period. Total revenue for the third quarter of 2024 was $88.1 million, an increase of 5.5% compared to the prior year. The increase was primarily driven by higher demand and new customers in international and domestic business-to-business sales, partially offset by lower direct-to-consumer sales and rental revenue. For the fourth quarter, foreign exchange had a positive 90 basis points impact on total revenue and a positive 330 basis points impact on international revenue. Looking at fourth quarter revenue on a more detailed basis, domestic business-to-business revenue increased 24.1% to $22.4 million versus $18.1 million in the comparable period, driven by increased demand from new customers and resellers. International business-to-business revenue increased 31.5% to $28.3 million compared to $21.5 million in the prior period, primarily driven by an increase in demand from our partners in Europe and new customers. Direct-to-consumer sales decreased 21.3% to $15.6 million from $19.8 million in the prior period, as we continue to operate with a smaller and more efficient team to drive profitability in this channel. As a reminder, we significantly reduced the size of our DTC sales force in early 2024. The effect of this reduction will not be reflected in our year-over-year comparisons until mid-2025. Rental revenue decreased 16.5% to $13.8 million from $16.5 million in the prior period, primarily driven by continued lower average billing rates due to the mix shift to private payers. Now on to discuss fourth quarter gross margins. Total gross margin was 45.3%, increasing 821 basis points from the same period in the prior year, primarily driven by lower raw material cost and operational efficiencies. Sales revenue gross margin was 46.5%, an increase of 1,369 basis points, driven primarily by…

Thank you, Mike. I’m very proud of our 2024 performance. Our results were the product of remarkable dedication and resilience by our team. We drove significant growth while continuing to innovate and deliver for respiratory patients around the world. I am confident that we will carry our momentum into 2025 and beyond and look forward to sharing our future progress. With that, I will open it up for questions. Operator?

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] And our first question comes from Margaret Kaczor with William Blair. Please proceed with your question.

Hey guys, it’s Max for Margaret tonight. Thanks for taking the question. I just wanted to start on the guide. What’s contemplated in the guide in terms of the Yuwell agreement throughout 2025? Any puts and takes on the guide overall would be helpful in that sense. And then my second part, I’ll just ask right up front. I know you guys said that Yuwell would be a headwind to gross margin, but believe you had mentioned some greater leverage in terms of operating margin. Could you just talk through some of the synergies you’re expecting there? Any color would be great. Thanks.

Hi Max, this is Mike. I’ll take that first part of that question at least in terms of the Yuwell gross margin impacts or even in our guidance. Our expectation is that Yuwell won’t have a significant impact in our results for 2025. We do have some revenue in there, but keep in mind, we just closed this deal last week, so it’s going to take us a while to get up and running there, but we don’t have a lot in there. The comment that I made in my prepared remarks about the gross margin impact to Yuwell really relates to – let me add something, this might be helpful. So there’s a couple of items that are – we’re looking at in terms of having a one-time impact on our gross margins in 2025. And they don’t amount to a lot, but everything adds up. So the reference to the comment I made in terms of the Yuwell impact is really Yuwell and Simeox introductions and kind of laying the groundwork for those products to be implemented and rolled into our other product lines. That in addition to some premiums of raw material purchases made in previous years that was still sitting on our balance sheet, both of those amount to in combination about 100 basis points, not significant amounts but we felt it was important to mention those in terms of our guidance impact. So that’s the guidance impact that we would see in terms of Yuwell. Again in terms of 2025, not a lot of revenue in the end built into our guidance.

Yes. The other thing I’d add on to that – sorry, Max, this is Kevin, is just you’d also asked a bit about the supply chain. I think you’d asked about that as well. And there’s some potential for us as we continue to mature the relationship here with leveraging their purchasing power, with our purchasing power, we are purchasing in our respective businesses and similar components of raw materials.

That’s great. Thanks guys.

Thank you. And our next question comes from Robbie Marcus with JPMorgan. Please proceed with your question.

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I think the best way to answer that question, first of all, we don’t – we haven’t guided to gross margin, I mean, sorry, by revenue channel. We haven’t done that in past. We intend on doing that now. But I think to give you a general feel for what – how we approach the guidance in terms of revenue for the year. So, in 2024, we saw a lot of growth in our B2B business, I think combined around 30%. So we see that continuing in terms of the B2B business being a major part of our growth, but not at that rate. The other thing that kind of factors into our revenue guidance for the year, when you look at the D2C business, we had talked in the past about how the D2C business – we made a conscious decision to make that channel more profitable. How we did that, we took a lot of cost out in terms of reps. So the rep count is significantly lower than we’ve had in previous years. So, as a result of that, you see a reduction in revenue. That we expect to continue to the first half of 2025 in a similar way that we saw 2024 play out. So, in other words, until we get to the point where that rep count is consistent on a year-over-year basis, we’ll continue to be challenged on the D2C revenue lines. So that’s what we’ll see in the first half of the year. So those are a few things that we’ve looked at in terms of how do we build out that revenue guidance number. The other piece of that that I didn’t mention and is part of our business is the rental business. So when you look at the rental business, there’s a lot of things that we’re doing to try to improve that business. But in terms of looking at are there going to be anticipated like significant changes in that business in the near-term, we don’t see any significant changes in the near-term. Again, working a lot of things to make that revenue, that channel more profitable and generate more revenue. But in terms of the short-term, we don’t see any significant deal movers. So that’s how we approach our revenue guidance.

Got it. Thank you. And then second question, you gave us the first quarter guide, but how should we think about the cadence kind of through the rest of the year? It kind of seems like you’re seasonally maybe flattish from fourth quarter to the first. And then how do we get to the balance of the guide from a cadence perspective? Thank you.

So, yes, in terms of Q1, we did provide that. I think if you look at we’re not expecting any significant – I guess, changes. If you look at our previous years and you look at traditionally, you’ll see Q2 and Q3 as strongest revenue quarters and also our strongest quarters from a DTC perspective. We do have seasonality challenges in Q1 and Q4. So in terms of the cadence, I would say that, that would probably be – would be a good way to look at it in terms of nothing significant in terms of continue to expect to see Q2 and Q3 as a strong orders in Q1 and Q2 being, the lower quarters and again challenged by seasonality in those quarters.

Thank you. And our next question comes from Mathew Blackman with Stifel. Please proceed with your question.

Hey, guys. This is Colin on for Mat. I wanted to start with a quick one on Yuwell and their portfolio and how you’re going to introduce it to the U.S. Is that going to be similar to Simeox and that you can sell it across all channels and leverage the same call points or are you going to be selective about the channels and is there incremental investment involved there? Anything on that would be helpful.

Sure. So that is similar in the sense that we do see opportunities for the Yuwell products to be able to go across our channels. We’re starting off with the stationary oxygen concentrator, which we will have branded as Inogen. There’s opportunities for us both on the – when you look at the rental segments, the B2B where we see significant opportunities where today we don’t have a stationary oxygen concentrator offering for B2B. So that gives us the potential to sell both of those components. It will have an impact on our rental business. It will have a positive margin impact on our rental business and that you may or may not know or maybe people don’t broadly know that every time when we place a POC, a portable concentrator in Inogen with a patient through the rental chain, we also need to supply a stationary concentrator. And it’s a similar thing with others in our B2B network, our partners. So it’s an opportunity to be able to package these up and have both of those in the rental and the B2B and there’s also the opportunity for us to sell for cash in our DTC channel. So leveraging the existing sales organization, not having to add additional sales people or sales functions, if you will, so more throughput, more productivity per run.

Got you. And a quick follow-up on rentals in particular. You guys talked about the payer mix shift towards private payer. Is that a dynamic you see changing anytime soon? And what’s really behind that movement, if you don’t mind me asking?

Certainly. So the – really when we look at that dynamic on the mix shift, it’s more of that shift from traditional Medicare towards Medicare Advantage and we’re seeing more patients have been moving to the into the Medicare Advantage plans. Some of that how that is going to continue in the future is going to be dependent on the current administration and how they view Medicare advantage versus traditional Medicare. But that is something that we anticipate seeing that continue on in the near future.

Our next question comes from Mike Matson with Needham. Please proceed with your question.

Hey, guys. This is Joseph on for Mike. Maybe just the first couple around Simeox. Just trying to understand a little bit more the pathway towards the eventual launch. I guess just looking at maybe like a data readout in the future, is there anything that you can kind of frame up for us? I mean, you guys, I think have are generating some clinical evidence out in Europe. So if there’s something coming down the pipe, that’d be good to know about. And then I guess maybe just more broadly around KOL engagement with Simeox, can you just maybe give us another brief explanation of how you’re kind of framing up the strategy of engaging private insurers before you get to Medicare reimbursement? And then I’ll have one after that? Thank you guys.

And I’ll start with that, Mike. So on the Simeox, we do have data that has – that we’ve been generating and Physio-Assist had been generating prior to the acquisition in Europe. Typically, small data-sets on patient populations, mostly single center studies in Europe. We do have some additional work that is going to be ongoing in Europe. We’re expanding out some of those clinical trials, including reimbursement trial, which would be multi-centers, multi-countries aimed towards reimbursement in Europe, particularly for the U.S. the timing on that and going towards reimbursement, part of that is going to be determined by the communications discussions that we have with one of our key opinion leaders as well as we had early engagement with CMS. Our goal is to make sure that we maximize reimbursement for Simeox in the U.S. marketplace. So we’re more concerned with assuring that we maximize that than getting as quick as possible a response from CMS. So by that I mean we have two opportunities in the calendar year to submit for reimbursement. You have January 1st and you have July 1st. So we are engaging with key opinion leaders. We’ve identified the thought leaders in the country. Our medical team and our marketing teams are engaging with the physicians talking about Simeox, talking about some of the data that’s relevant and available from Europe, talking about the patient populations here, how we could impact those patients and what data both thought leaders would to have as well as what we believe is going to be necessary for reimbursement ultimately with CMS. So that is – that’s been mapped out. That’s a process that our Chief Medical Officer and our teams are in the process of engaging. On the private side, the private side, we will be starting engagement with the private insurers to also start to look at what is that needs to happen there in order for us to get reimbursement from private payers. From private payers prior to having CMS reimbursement and some sort of a foundation there, you typically have to go through the process of getting physicians to give the prescriptions, those are submitted to the insurance company, those are denied, you go through an appeals process and there’s a series of those. But it is a bit of a sequence and a dance to make sure that we’re doing the right things, not putting the overall reimbursement with CMS at risk. But again, I’ll point back to wanting to make sure that we maximize that reimbursement.

Okay, great. Yes, that all makes sense. And then maybe just, I guess, around the prescriber sales force, so just curious if you could kind of talk about any referral trends that you guys are seeing here at the start of the year. I guess, more broadly, just on the sales force, the size of it, whether you could put some numbers on it or just look at it big picture. What does that sales force look like at the start of 2025 versus the same time last year? It sounded like in your guys’ comments that there’s still some rightsizing to do there. So I’m just curious here in the first half of 2025, what are you looking at in terms of like, I guess, some more pruning that needs to be done?

Well, it’s one thing just to make sure that it’s clear and then let me see if I’ve missed something on the question column, but the – when we – there’s two aspects that we talked about. One is on the DTP channel or the DTC channel that is the drug to patients, drug to customers. That channel is reduced in headcount from where we started in the – at the beginning of 2025. That was a re-baseline year that we had in 2024. So the first half of 2025 compared to the first half of 2024 will be an unfavorable comparison, meaning that we have fewer reps in the first half compared to prior year. The back half of the year is where that will be more of an equivalent year-on-year comparison in the DTC channel. In the prescriber channel, that is the sales reps that are calling on the physician’s offices do a poll from a prescription referral standpoint. Those sales reps we did downsize at the beginning of the year. We had a third-party relationship. It was like a sales force for hire that we did away with that relationship at the beginning of the year. We brought a much smaller team in house of effective reps that have been going out and building those referrals directly with the physician. So I just want to make sure that it’s clear that we’re talking about two different things, sir.

Yes, absolutely. Thanks for separating that out. It’s really helpful. Yes, thanks for taking our questions.

Thank you.

And with that, there are no further questions at this time. And this does conclude today’s teleconference. We thank you for your participation and you may disconnect your lines at this time. Thank you.