Good morning. Thanks for joining us at the 23rd Annual Needham Healthcare Conference. I'm Mike Matson, and I lead the MedTech Equity Research team here at Needham and Company. I'm pleased to introduce Inogen. Presenting from the company, we have President and CEO, Kevin Smith, and CFO, Michael Bourque. Instead of a standard presentation, we are gonna do a Q&A session or fireside chat. If you have any questions you would like to ask, you can submit them electronically through the Needham Conference website, or you can feel free to email them to me at mmatson@needhamco.com, and I'll do my best to fit them in. With that, we're gonna dive right into the questions here. Obviously, both Kevin and Michael are new to the company, or fairly new to the company.
So I wanna start out by, you know, just with Kevin, if you could maybe talk about your background and sort of what attracted you to joining Inogen.
Sure, Mike. Thank you. Yeah, so my background, I joined Inogen from a company called Sirtex. I was the CEO of Sirtex private company. I was there for a few years. My background has been primarily orchestrating turnarounds and working with teams to get companies back on track. And what attracted me to Inogen was some family history of COPD and the recognition that tanks prohibit people from moving and living their best quality of life. I've seen that personally. I've seen the struggle that other people have to be able to enable to take care of those people and enable the movements. And, you know, frankly, I wasn't aware of Inogen before I joined the company.
I wasn't aware of POCs technology, and I know what that benefit could have been. The board of directors is great. I think we have strong talent here in the organization. Technology is phenomenal, and certainly brand recognition is strong there as well.
Okay, and Michael, I just wondered if you could answer a similar question, sorry, you know, in terms of your just quick overview of your background and what attracted you to joining Inogen.
Sure. Thanks, Mike. So I'm Michael Bourque, CFO. I've been here at Inogen for just about a month now. Previously, I was a CFO of Chase Corporation, not the bank, but as a specialty chemical company, and I left there after a successful exit to private equity. But prior to that, prior to Chase, most of my career has been in med device, life sciences, with publicly traded manufacturing companies. And I joined Inogen because I just saw a great product after my meeting with Kevin and some other members of the team. Just felt like it was building. Kevin was building a great team. I was then, and I am, remain confident and optimistic about the future of the company. I just wanted to be part of it.
Okay, great. Thanks. And then Kevin, you know, can you maybe talk about, just from a high level, now that you've been there for a few months, you know, what sort of strategy you plan to pursue?
Yeah, from a extremely high level, we're focused on the top-line growth, right? We wanna be able to get the growth in the right level for the organization, but at the same time, managing our... We can return to profitability in the near term and developing the pipeline. And developing the pipeline in the right way, where we're focused on opportunity growth.
Okay, got it. And then, you know, you mentioned profitability. So the EBITDA margin has fallen pretty significantly in the past few years. You know, what do you think has really sort of driven that, and, you know, how do you expect it to turn that around, I guess?
Yeah, I'll take that one, Mike. Yeah, so I guess just, I'll try to do this without being too much into details. But in 2022 and 2023, we reported adjusted EBITDA losses, as you probably know, $13 million and $37 million, respectively. That was after about a $29 million positive adjusted EBITDA in 2021. So obviously, the, you know, fluctuations in our top line impact that. And there are just a number of other factors impacting our adjusted EBITDA and our EBITDA margins the last few years. Just go through those real quickly here. Just in 2022, we, you know, we had a... We saw a decline in our gross margin percentage from the high 40s to the low 40s.
That really driven by some premiums in raw materials, more specifically, batteries and motherboards that we have in our POCs. And we also saw some higher OpEx costs, selling and marketing costs a little bit higher due to some the prescriber sales team that was external, that we saw costs increasing in 2022. In some other areas in OpEx, R&D, and G&A on product development, personnel, things like that. So that clearly impacted 2022. 2023, you know, in addition to the revenue fluctuation, we kind of maintained the same margins in the low 40s, but we also had unfavorable revenue mix. Higher percentage of our total revenue was B2B as opposed to direct-to-patient revenue, so that obviously impacted EBITDA margins, as did some of our our incremental costs in G&A.
A lot of things we described in the 10-K. We had restructuring fees, we had CEO transition costs, we had acquisition-related fees. So although our R&D and selling and marketing costs did go down in 2023, the G&A impacts our EBITDA margins in 2023.
Okay, got it. And then, you know, just the... So it's kind of a balancing act, I guess, trying to drive the improved revenue growth while trying to improve profitability at the same time. So, maybe just Kevin or Michael talk about, you know, kind of how you plan to do that and, you know, can you really do both at the same time? And, you know, to what degree do you need to spend, I guess, more in certain areas to drive revenue growth? Like advertising, for example, or some, you know, sales force hires, et cetera?
Yes. Yeah, certainly, and, you know, we do see the opportunity to balance that, and push for both, here going forward in the near future. The within the sales organization, there are opportunities that we've identified with, you know, frictions between the channels, some relationship building that certainly can happen, and that add some near-term benefit to us in the B2B, both in domestic and internationally. And then, you know, ways for the team to be able to not just work together, but also within the marketing group, collaborating with the sales organization. There was a bit of a silos that we've worked with here in the past.
These are opportunities for us to grow that aren't gonna require significant investment for us going forward. So, so we're not saying that we have to add a bunch of pieces to the puzzle in order to do that. We've added some additional and made some changes at the, at the leadership level within the commercial organizations to help enable that, and we believe that they're, they've got the right plans going forward. Reducing the COGS and controlling spends, you know, those are things that we're looking at every dollar that we put into the organization as an investment back in the company. So we are taking the resources that we have. We're focusing on reducing the cost of goods.
We're challenging every spend that we make as, is this the right investment for the company, or is it a dollar that can be reserved or that can be put somewhere else for more effectiveness, which again attracts us towards the profitability. Then, further, when we look at the out years. First off, I think our portfolio that we have today is good for us to be able to achieve a growth and get back to where we need to. That being said, we are looking towards the launch of PhysioAssist.
We believe that the Simeox product is gonna be beneficial to us going forward, and we're continuing to look at ways to advance our portfolio that are gonna be more than iterative releases, but something that can be more transformational in the future.
Okay, got it. So I wanna move on to the supply chain. I mean, that's been an area where there's been a number of challenges in the past few years, which is understandable. I mean, it's... We've seen it at a lot of companies. But you know, it seems like these have largely passed. Can you just give us an update on where things stand for Inogen, and to what degree you're able to meet all demand from customers at this point?
Sure. I'll start with that, and, Mike, from meeting the customer demands, yeah, we don't believe that we have any challenges right now to be able to meet the short-term demands. We have capacity. We have supply chain stability. We've been working towards multiple supply agreements and breaking out from having a single-source supplier to having multiple suppliers, so we've been working on that rapidly and engaging to make sure that we have that assurance going forward. Then anecdotally, we've seen some of that recently with customers who've asked for short turnaround on relatively large orders in the B2B, and we've been able to fulfill those. So, so we don't see any near-term disruption.
Okay, got it. And then what about just from a cost perspective, the... You know, I know that there was some inventory that had been on the balance sheet that had been purchased during the, you know, kind of on the, the open markets, chip purchases, and stuff like that, that, that were at higher cost. So is, is there- are you still carrying some of that on the balance sheet? And, you know, what, what point do you think that'll be completely kinda flushed through, and you'll be back to more kind of normal, normal cost there?
Yeah. Hi, I'm Mike, I'll take that one. So, we have made progress in working through the high-cost components on our balance sheet. I think it was our Q3 earnings release. We know it. I think a number was $4.8 million that we had remaining on the balance sheet at that point in time, and we expect, and we continue to expect, that we'll be working through that, those premiums, probably by the end of the first half of this year. And the premium components, obviously, running off will help our COGS. Yeah, working on other initiatives and cost of goods sold. And so in addition to the premiums running off and these direct other cost initiatives we're implementing, you know, we expect to see some improvement there.
Okay, got it. And then, in terms of the products, I mean, you have launched a few new products lately, so there's the Rove 4 and the Rove 6. So, can you give us an update on, you know, what the products are, how they compare to the prior versions, and, you know, how the launch is going of those products?
So certainly, the Rove 6, that's our most recently launched POC. Yeah, that is... It's focusing on continuing the mobility for our patients, where that's progressing well. The real difference in that is, it's a bit of a fresh, I'll say, but it's a newer version of the G5. It enables us to continue the life of that product line along further, and we've been seeing good traction for that. The Rove 4 is a lighter-weight version, so it's targeted towards capturing patients a little bit earlier in the disease states. But that's not yet launched, and we'll give some announcements on that at the appropriate time.
Okay. All right, and then are there any other, product launches planned for this year or next year?
Not that we've announced on publicly on the timeline there, and it is a keen focus for us to make sure that we are staying at the POC side, but then also looking in the future for those blue ocean opportunities. And yeah, at the appropriate time, we'll do that, but we haven't given any indication yet or specifics on launches for 2024 or 2025.
Okay. No, that's fine. And then just you did mention Simeox earlier, so, can you give us an overview of the product, kind of what it is, the market opportunity, and, you know, any sense of when you think you could launch this product?
So yeah, you know, this is exciting for us, this opportunity with PhysioAssist, and the product is Simeox. Specifically, that is, that's going to be that we're working on towards the U.S. launch. But in general, so Simeox, it's a, it's an airway clearance device, but it is currently on the market in the EU, and it uses a, a patented vibratory signal that liquefies bronchial mucus to clear patients' airways. It's, it's based off of five-year research on mucus rheology and signal dissemination computer models, but it's been out on the market again for five years in Europe, and we have more than 2,000 patients using it at home, today within the European markets. So it's primarily used to treat bronchiectasis, which is often present in patients with COPD.
Yeah, so basically, mucus secretion is one of the first disease symptoms, and leads to a higher burdening systems in the daily life of patients like cough, fatigue, dyspnea, and recurrent respiratory infections that worsens the lung conditions. So Simeox is unique. It's different than traditional vest-based technologies. It's less cumbersome, allows the dislodging of mucus that sits in the small airways comfortably and easily for the patients. We believe it's gonna have a positive impacts on the patient's quality of life. We haven't given the exact market sizing opportunities for Simeox, but if you think about it in a broader picture, there's, you know, 80+ million, depending on the reference data that you look at worldwide, of patients with severe chronic COPD. About half of these patients need airway clearance.
So beyond that, once we get closer to that launch and the plans and the commercial opportunity for it, we'll talk more specifically about the addressable market. The timing on it, we haven't commented on the timing on that yet. We are actively engaged with the regulatory process here in the U.S., and we look forward to being able to talk more about that soon.
So with this product, I mean, how would you, you know, you've got kind of these four sales channels, and I'm gonna talk more about those on the POC side in a minute, but you know, with this product specifically, I mean, how would this be sold, and which of those channels would you be selling it through?
Yeah, and if we look at the channel, so there's, you know, we see opportunities across the channels for this. So this isn't something that we're looking at today, that we have to invest in a new channel to bring it to market. It will be used in the home with the patients, and the first device that we're gonna be launching here in the States, similar to how we see it going over in the European markets. So there's opportunity, we believe, in our, you know, consumer channel or direct to the patients as well as the prescriber channels, building the physician references, as well as B2B.
And our B2B partners, we've had some discussions with, and we know that they have products that would be, in some cases, competitive. In other cases, we could segment patient populations that we'll work towards in the future, where they could, you know, potentially both benefit, yeah, different patients. So we see this as something that would fit nicely within each of our channels.
Okay, got it. And then finally, just one more on Simeox. So the reimbursement and pricing, I mean, can you comment at all there?
We have a strategy for that. Yeah, there's really not much that I can really comment now, other than, you know, we know that there's certainly work to be done, yeah, for that. We understand where the opportunities are, and we're building towards, yeah, towards that, yeah, going after CMS as well as the private and so forth.
Okay, understand. And then I want to move on to talk about your DTC rental business.
Mm-hmm.
So the prior management team, you know, had really focused on the prescriber channel to drive this business. You know, to what degree is that prescriber channel still a priority for you guys?
It is a priority for us. It remains a focus for our, yeah, for Inogen here today, and we see that opportunity, of course, as we continue to build towards the future and add products, Simeox into that channel. But we did exit the third-party relationship that we had there. We took that opportunity to take the best reps from the third-party organization, where we reduce our OpEx by bringing that in-house. Gives us better control over the team as well, fully integrate them into Inogen, so they're a clear part of the team, and there's learning that's going on, best practices between the organization.
So, we're excited about the move that we made and thrilled to have these reps part of Inogen.
Okay. So, not to second-guess the prior management team, but I guess if it's cheaper and, kind of have more control by having it in-house, I mean, what was... I mean, I guess why was it kind of outsourced to begin with? I mean, I don't know if you have any thoughts on that, but, I mean, there must be some advantage, maybe just flexibility to add or remove people as necessary or something like that, or-
You know, I'm going to speak generally just about, you know, why would you want to have an external sales organization? You know, those types of firms, they do make sense in the right situation, and they add value if you want to scale up quickly and the time and the process to go through hiring a bunch of people versus going to an organization that specializes in rapidly standing up an organization for product launches and so forth. You see it often in pharma, you see it in other areas. That would be the advantage.
And then, you know, as you said, to be able to, to scale up, scale down, it's, depending on the contract you negotiate with them. You know, certainly there could be, you know, there's times when that would be advantage. You know, we look at this, for ourselves and saying, "We want to grow profitably. We want to make sure that we are focused on spending in the right way." Yeah, how do we do that? What do the numbers need to look like on a, on a per sales rep? And so we're focused on making sure that the decisions that, that we make to, to put people in the field, to have the, the right call patterns and so forth, that's going to return a profit to the organization.
So we just, that's, yeah, an opportunity for us to take that approach.
Okay. And then, just in terms of, I guess, physician targeting, with the sales force, so, you know, how do you identify kind of the, which physicians are the high volume oxygen prescribers and, you know, how do you kind of direct the salespeople there? And, I guess with these salespeople, you know, how I don't know if you're going to disclose a number that you're going to end up with, but, you know, how do you ensure that they're in the proper locations, and they're not spending a lot of time, you know, traveling from one customer to another?
I think you hit on the crux of the challenge there, right? If we focus on individual physician offices, then there's a lot of windshield time, yeah, in between those, as you're making the milk runs and so forth. And that's where we've been spending time, and I've been listening to the sales organization with the sales teams and the sales managers, with where do they see the opportunities for us to grow. Looking at the sales reps that are extremely successful and are clearly turning a profit back for, you know, for all of the associated support and spend and so forth, and saying, "What are they doing?
And what can we—how do we take that into other sales reps and territories, and give them the right tools in order to be as effective as that?" So it is, we have data, we know where the physicians are, but we're also looking at this in a different way, where do you get... And I won't go into a lot of detail on this yet, Mike, but yeah, how do we get more bang for the buck, and not having to just go from one physician to the next physician? And yeah, we're putting some initiatives in place that we think are going to make that much more effective.
Okay. And then just finally on this, the rentals business, I mean, you know, there was a time where I thought that this was kind of the biggest growth opportunity for the company, and you could potentially sustain, you know, solid double-digit growth in this business for the long run. Because, you know, the patients seem to want the POCs, a lot of the other companies out there are providing them. And the patients, you know, maybe there's a co-pay, but they're not having to write a, you know, $3,000 check or whatever, like they would on the sales side. So, you know, can this business grow, can it be a double-digit business, I guess, within Inogen? I mean, it seems like it should be able to, but maybe I'm missing something.
It certainly has that opportunity to grow, whether the trajectory, yeah, the specifics on forward-looking. We haven't guided to that, and I want to stick to not going down that path here right now, Mike. But we do see this as a viable and, you know, good potential growth and profitable piece of the business going forward. You know, this is... Yeah, but it's got to be a little bit different than just doing the, you know, the one physician at a time, yeah, type thing.
Yeah, I understand. Okay, and then moving on to the DTC sales side. So, you know, the prior management team here was kind of pulling back a little bit. They weren't giving up on it, but they were scaling back the sales team a bit. And so what is your view of this channel? How important is it to Inogen? And, you know, do you believe that you've got the right, you know, size sales force at this point in time, inside sales force for this business?
Yeah, so Mike, we believe that we have an excellent sales and marketing team, and, you know, they're focused on the DTC sales. We've been listening to, we're listening to our sales team, listening to the recommendations to enable profitable growth. We're not gonna comment on really on the size of our DTC sales team now, but we do believe there are friction points within this channel, and we think they can become actually opportunities for us with the right attention. And this channel is part of our growth strategy.
Okay. All right. And then, you know, what about the advertising component? Because, I know, that's, that is a pretty big line item within this business. So, you know, how do you feel about the spending there? You know, is it at the right level? Does it need to go up? Does it need to go down?
Yeah, so we... Well, you know, we are and we'll continue to evaluate that and the return on those advertising investments. I'll just make a, I guess, a couple of points now, here. So first of all, you know, the election cycle has an impact on the cost of our ad placements, and we do see advertising benefit across all our channels. We've heard physicians, as well as B2B partners, basically telling us that their patients are asking for Inogen as opposed to generic POC. So yeah, we'll continue to look at that, and we won't really necessarily talk about specific numbers at this point.
Okay. No, that's, that's fair. And then, just want to ask one on pricing in the DTC sales channel. I know in the past, there's been, there were some kind of price testing that was done, and you, the, the management teams would look at the elasticity of demand and things like that, and kind of optimize pricing based on that. I think more recently, the prices were raised pretty significantly, just given the, the cost-side of things and, you know, the pressures there, and then just in the inflationary environment we were in. So, you know, how do you- how are you gonna go about determining, you know, for this specific channel, because it is essentially consumer out-of-pocket, you know, product, you know, how do you, how do you determine what the right price is here to kind of...
You know, I think the original management team was trying to kind of optimize operating profit dollars from this business, and upsetting the pricing based on that.
Yeah, so I guess I'll start that one, and Kevin maybe will want to add to this. But I guess just at a high level, you know, we believe that we have a strong value proposition that supports premium pricing. Keeping in mind, we have recently added new commercial leaders. So, you know, we'll continue to evaluate our pricing strategy, really just to support our overall profitable goals for growth. I don't know, Kevin, if you have anything to add to that.
Sure. You know, and, and that this is also, you know, something that is reflective of our listening to the, to the sales organization. But we're, yeah, we're been, talking to the, to the sales reps that are involved with, you know, opportunities that are, are lost and why, and what's, you know, what's happening. And we're generating a, a large volume of, of leads that are coming in, and these leads that are coming in, we know are, are patients that are taking action and either calling us, directly and speaking with one of our reps, or sending in a message and, and saying, "Hey, I want somebody to, you know, to reach out to me," and then we're following up with them.
So we've got somebody on the phone, and yeah, the only reason that we really should be letting somebody walk away is if they don't have a prescription for oxygen, and we can't get them the POC that way. So we're looking at all those other ways to say, how do we get these people who not everybody can afford, for example, the price, right? To be able to pay out of cash.
But we're looking at segmenting those patients to, you know, to making sure what's that premium package for those people that want, desire, and can afford that premium package, and what are ways to, to go after some of, some of the other patients so we're not, so we're not losing them, whether it's, whether it's financing options, whether it's, working on a partnership with some of our B2Bs, with it, you know, for, you know, for servicing other patients. So we, we do see, continue to see opportunities in there, but I think the question originally was around the pricing and so forth there. You know, we, we are taking, again, a disciplined approach to pricing and, and getting the value that we do have in our POC.
But there's other things that we can do out there as well to try to service some of those patients who we want to be able to have an Inogen POC, but perhaps can't afford the device.
Okay, got it. And then moving on to the domestic B2B channel. So, what are you seeing these days, you know, with the larger kind of national and regional HME companies? You know, are they... You know, it seems like there's still a move underway, away from tanks, you know, or, sorry, the delivery model, more specifically, to you know, either home fill or POCs. I mean, is that kind of your sense as to what's happening? And I guess, how has kind of the COVID era, inflation, and, you know, higher interest rates kind of affected that? Has that slowed things down to some degree?
So we, you know, we've been encouraged with the conversations that we've been having, both in the international markets as well as the domestic markets here. Look at that total cost of ownership and the total cost to keep a patient on service and oxygen, whether it be the tanks here in the U.S. or the liquid oxygen, the bottles and so forth, outside the United States. And we're seeing the feedback I have from our own internal people is that there seems to be more openness to doing that evaluation going forward here. So that's encouraging, yeah, for us. I think there is an opportunity for us to make sure that we position ourselves well, and I do think that the eight-year serviceable life that we have on the Inogen POC fits us nicely into that discussion.
Because it's more years that they can have a patient on service, that they could bill for an Inogen POC versus the next closest, which is five. So that's 36 more months of billing with an Inogen.
Okay, got it. And then, just, what, what's the, you know, competitive environment like in the POC space in this channel specifically? I mean, it seems like, you know, there's been some pretty intense price competition. You know, I know there was, like, a shortage of products, and then, I think that, you know, Inogen had sort of chosen before to direct some of that to their higher margin channels, which I guess made sense at the time, but it seemed like maybe there was a little bit of a backlash against that among your customers, where, you know, they kind of, you know, were annoyed by that and, you know, had moved their business elsewhere, and it was a little difficult to get it, to kind of win that back. And the, the...
Then when you tried to win it back, the competitors, sorry, started, you know, slashing prices and stuff to keep the business that they had picked up.
Yeah, and that's a battle that's you just can't win, right? If it's, you don't want to chase it down to the, you know, to zero profitability. And we are again keeping that price discipline within this model, but what we've been doing is having very transparent conversations with our B2B partners, ones that we currently have relationships with and others that we don't, that we're looking at relationships with. And, you know, talking about that, one, the total cost of ownership, but then also talking about where we have frictions within the channel, what we can do to one, smooth that out, and two, how can we become better partners for them? And we've made a lot of good progress in those discussions. I think there's opportunities for us.
I believe that there is a, there's a recognition in the quality of the Inogen. The advertising that we do, that Mike was talking a little bit about, that spends, that really benefits all of our channels. We do hear, as you said, those physicians that are requesting an Inogen versus a POC, and the HMEs hear the same thing. And patients sometimes, if they're reaching out to us and they're trying to buy directly, and then they find out that their HME would be able to provide, they're still asking for an Inogen. So that puts us in, I think, a pretty good position, but we can't take this, we can't walk around with a sense of arrogance, right?
We have to be good partners for these, you know, for our B2B channel, and, and we're putting ourselves in that spot.
Sure. And then, you know, I have to ask one on, on the Philips situation, with Philips exiting the market. We just did a survey, and it looked like their, their market share was around 17%, at least in the U.S., in terms of POC. So, you know, do you think... How much of that 17% do you think that, Inogen can, can pick up and, you know, I guess our survey was indicating about a 1/3 of that. You're probably not gonna comment on the numbers, but, you know, just generally, how should we think about this? And, you know, I think on the call, you said it wouldn't be a windfall, but, it does seem like it's got to help you to some degree.
Yeah. Yeah, I do. Yeah, I appreciate the work you went into on that data. That is certainly, yeah, helps us with our line of thinking compared to the work and so forth that we do. And like you said, I won't comment on the numbers, and everything you said, I think, is, yeah, concisely, you know, brings back what we said before on it. We do see it as an opportunity. You take a premium player that is now out of the market, it should give us opportunities going forward, and we are aggressively going after that to make sure that we set ourselves up to be that premium product of choice to work with the B2B partner.
So I think there's gonna be an opportunity. We're not ready to, to quantify that, but we're certainly going after it and looking at it from a commercial organization, that, that there is an opportunity there, and we need to be in position to, to win whatever we can.
Okay, got it. All right, and then, you know, I had a question that, where I was gonna ask about kind of your expectations for, for the growth rate of the business, but just based on some of your prior answers, I don't think you're really at a place where you're willing to, to answer that. But I guess what, what I will ask instead is, you know, when, when do you think you... Do you have a feel for when you could maybe give us some longer-term guidance? And, you know, would you consider having, like, an investor day or something like that, and lay out some longer-term plans for, you know, what, what the company can actually do in terms of top and bottom-line growth and things like that?
Mike, you wanna take that?
Sure. So, I think we've, you know, and we've said this a few times, Mike. So, you know, we have a lot of new people in executive-level positions. We really kind of need to get our arms around the business. We wanna provide really the most accurate outlook as possible. And we really haven't provided forward-looking guidance, and as you know, in much detail. I think as we kind of progress and we get, you know, we get more comfortable with you know, kind of where we're at, we certainly will be looking towards providing, you know, more, kind of more traditional outlook, I guess, more guidance. And we really haven't discussed an investor day at this point in time.
Something we could probably think about, but we really haven't talked about that.
Yeah, understandable. All right, and then just gross margins. So, you know, what's the outlook there? It seems like... I mean, it, it's always complicated with Inogen because of the channels. The channels have such widely different gross margins. It really depends on the mix. But, you know, I guess holding the mix kind of constant, it seems like, you know, they should be getting better, just given the easing of inflation and some of these supply chain challenges that you've had. Is that reasonable or?
Yeah, I think so. You know, so we did talk about premium price components that were being worked through. I mentioned that earlier. You know, but it's not just that, Mike. We're looking at other avenues to improve profitability. We have some initiatives that we're piloting right now, that we think will have a favorable impact on our gross margin, in addition to the easing of those premium components. We did, as we stated in our Q4 earnings call, we expect sequential improvement in gross margin. But in addition, you know, so we're looking at everything really, Mike. We're looking at, you know, we talked about revenue growth. We're looking at improving gross margins, as I mentioned, in the COGS area. We're looking at OpEx, we're looking at CapEx.
Really just trying to leave no stone unturned, really, and these things take a little bit of time, but we're feeling pretty good about some of them right now.
Okay, got it. And then, you know, just similar question on, you know, you said you're looking at everything, but OpEx specifically, you know, R&D, sales, marketing, G&A, are these sort of at the right levels right now, as a percentage of sales, that is?
Yeah, I think that kind of gets back to the semi, one of the earlier points, about, you know, forward-looking. So, I, I guess I'll answer it this way: We're always looking for ways to streamline the business and reduce waste, and really just, you know, really wanna focus on managing that cost structure. You know, we'll continue to invest in pipeline development going forward. You know, obviously, some of that will go into PhysioAssist, and as I mentioned before, it's really something we're really serious about, that every dollar we spend, we look at as an investment into the company.
Okay, got it. And then what about, you know, from a headcount perspective? I mean, do you feel like Inogen's at the right level, and, you know, is this a situation where there needs to be some sort of restructuring or something like that?
I guess I'll start off by saying we're really excited and pleased with the team and talent that we have in place right now. We feel we have a lot of great people in-house already. And always looking to determine what is the most efficient organization we can have. So we have to look at the foundation we have today, and really what are the future needs that we have, just to make sure that, again, getting back to spending, you know, managing spending appropriately, so we'll continue to do that.
Okay. All right. And then, you know, just on the balance sheet, I think you had about $125 million of cash at the end of the year. So, you know, what's the plan for using that cash, if anything? I mean, do you... you know, there's been some M&A in the past that's been kind of mixed. You know, one of the deals didn't work out so well. And then, I guess the jury's out on Simeox, so we'll have to see what happens there. Hopefully, that'll work better. But, I mean, are you looking for other... I know you're just, Kevin and Mike, are just kind of, you know, getting your arms around things, but, like, longer term, I mean, would you be open to more M&A or, you know, other uses of the cash?
Yeah. So I guess, in terms of the M&A, really, at this point, Mike, we're really not—we don't have no current... any current plans for additional M&A. Obviously, we'll continue with, conservatively manage our cash position. You know, and, and, and then, you know, looking at, at the advancement of the PhysioAssist approval in the U.S., clearly something we want to focus on, we need to get done. Really, again, just I'll just reiterate, looking really hard at our OPEX, our CapEx, you know, really just at preserving and extending the cash balance that we have. And, again, I can't say it enough times, really looking at every dollar that we spend as an investment. As I said, we're serious about that, and it's something that we're really looking hard at.
Again, not leaving any rock unturned. I don't know, Kevin, if you had anything else you wanted to add?
Yeah, just on that, thanks, Mike, and I agree with what you said there. And then, yeah, otherwise, it's we feel like we have a good cash position right now. We don't feel as if we need to go and raise additional funds, but we do need to make sure that we manage it effectively here going forward. You had asked about, you know, the future. Would we consider something? I think every company has got to at the appropriate time. You know, now is not the time for us to do that.
We need to focus on righting the ship and getting, you know, Simeox through the regulatory process to the commercialization, get all of that squared away, and then look for some down the road, start to look at bolt-ons and so forth. That could be a value, but that's not something for the short term.
Okay, great. I think we're out of time, so we're going to have to wrap it up there. But thanks for coming to our conference. I hope you have some good meetings today.