Welcome to Inogen's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 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 3 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 5 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…

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…

Thank you, Mike. We're proud of the progress made this quarter as we sharpened our focus on operational discipline, launched new products and advance 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.

[Operator Instructions] 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. So Simeox, we are working towards the reimbursements. We have a number of processes that are going forward to generate health economic data, the clinical data to make sure that we maximize that reimbursement. We are focused not just on reimbursement in the United States, but certainly across the globe. We have trials that are going internationally that would support our European as well as other international markets. We're tracking that. We are happy with the progress that we've been making, and we have not guided towards timing on that externally, but we're happy with the progress that we've been making there. And I will say, too, that, that is -- when we look at the Simeox and what that represents for us in the future, we talk about expanding our pipeline and Inogen being a platform play. The SOC is the first opportunity for us to really go beyond the portable oxygen concentrators, especially on a large scale, not on a niche play. And when we look at airway clearance and what Simeox ultimately represents for us, again, that is a high-margin razor-razor blade product that we're looking forward to. But at the appropriate time, we'll provide some additional guidance on timing.

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?

I'll take that one as well, Rohin. I think the way probably to phrase it is our focus has been on profitability, and we've been talking about that for quite some time now. Q2 marked the second quarter of positive adjusted EBITDA as we continue to execute our strategy. Overall, we're really pleased with progress of profitability with positive adjusted EBITDA in the last 2 quarters. In fact, we reported positive adjusted EBITDA in 4 of the 5 last quarters. I think it'd be -- this is a good time to talk about profitability metrics. What do I mean by that? I'm talking about operating income, adjusted operating income, net income, adjusted net income, EBITDA and adjusted EBITDA. When you look at these metrics, they're all favorable for every quarter over the past 1.5 years compared to the prior period -- the comparable prior period. So I would just say we're really pleased with the execution over the past 1.5 years on that priority as we continue to drive towards that path to profitability. Hopefully, that answers that question. In terms of cash, yes, we're pleased to have generated $1.2 million in cash in the second quarter of the year. We've also generated about $4.5 million of cash from operations and about $0.5 million of positive free cash flow. We really haven't guided to any future cash forecasting. However, we'll continue to look at our cash balance, our capital allocation, focus on the strategic needs of our business with a balance between maintaining an adequate cost structure and investing in the company where we see favorable returns on investment. With all that being said, as we said in the past, we're very comfortable with our current cash position and our ability to fund all aspects of the business as needed.

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, in terms of -- we -- as you know, we really -- we don't guide in terms of revenue per channel even and getting into the expected margins. We've our reporting has been basically in terms of gross margin has been based on looking at sales gross margin and rental gross margin. So we really rather not get into the expectation of what we look for in terms of gross margin for that product. It would be different when you look at some of our other products and you look at our different channels, right? So D2C, obviously, we look at what we sell a unit to one single patient versus what we sell hundreds of units, say, to a B2B customer. The price will be different based on that. And therefore, gross margin would also be different based on what channel. And we do look at the Voxi 5 as the ability to really enhance all those channels.

Yes. And I think I'll just add on to that is that overall, we do see that as a key piece on our path to profitability. And when we look at this, as Mike was saying, we look at different segments and the Voxi 5 fits into each of our segments. It's an opportunity for us when we look at the rental channel, it will improve our profitability in the rental channel as well as give our salespeople an opportunity to sell an Inogen package for patients rather than just the Inogen POC plus a different stationary concentrator for those patients. For the DTC, that's a higher-margin sale, as Mike was talking about even though we haven't quantified that. But we are happy with what we've seen as we've launched the Voxi 5 that we are selling those to patients for cash through that -- through our DTC channel. Those are -- that's more sales per patient, more revenue, and it's an opportunity for us to continue to bolster that. And when we look at this from contributing to overall profit, it's one thing to keep in mind that this is -- it's the same patient. It's the same physician, same customer when we're looking at our B2B channel. The same sales rep. So we're able to leverage the existing organization as well as our branding.

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. It's -- thanks, [ Ras, ] for the clarification. It is for -- we have trials that are running in both outside the United States and inside the United States that are related to reimbursement. So developing the health economic data that is needed with the value dossier to support reimbursement as well as the trials that are designed to boost acceptance and develop marketing claims. So there's different sides of that. We like the data that we've been seeing. We like the feedback that we've had. But the ones that I'm referring to specifically here in the United States are related to developing health economic data supporting 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 have said it better myself. You're spot on with that. That is -- when we're looking at our connectivity and our digital health, we are creating an ecosystem and part of that is to drive that brand preference, that loyalty, adding value back to, as you said, with our B2B customers to be able to monitor device health, to be able to interrogate devices for -- to be able to evaluate those in the field as they get calls back from patients to consider if they have a question on something, also to be able to provide easier ways to -- for the patients to be able to access information, to be able to order supplies and the general value that we're able to add there. But that is something that when we look at not just the technology that we have today in the field, but looking at future ones to be able to wrap everything into that same ecosystem and tie them into the -- into our connected 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 5 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.