Morning. Thanks for joining us again at the 25th Annual Needham Healthcare Conference. I'm Mike Matson, and I lead the MedTech and Diagnostics Equity Research team at Needham & Company. I'm pleased to introduce Inogen. Presenting from the company today, we have President and CEO, Kevin Smith, and CFO, Jason Richardson. Instead of a standard presentation, we are going to do a Q&A or fireside session. If you have any questions you would like to ask, you can submit them electronically through the Needham Conference website, or feel free to email them to me at mmatson@needhamco.com, and I will do my best to fit them in. Jason, Kevin, again, thanks for joining us. Jason, I'd like to start with you. Since you're new to the company, I think this is probably your first time speaking publicly at Inogen.
Can you give us a quick introduction to yourself and your background and why you chose to join Inogen?
Yeah, of course. Thanks, Mike, for having us. I first say that I'm excited to be part of the Inogen team. As far as my background and experience, I've spent 25 years professionally in and around the MedTech industry, working mostly for larger global MedTech organizations. I'd say in the last 12 years, have been in various leadership roles within those organizations, from segment CFOs to Chief Accounting Officer, Treasurer, CEO staff, and I've also been on a handful of boards. Most of that time was with Hillrom, which I think you're familiar with. I actually was with Hillrom kind of from its inception as a public company to when it was acquired by Baxter, and played some key roles in really Hillrom having some really nice growth over that time period, both organic and inorganic, and ultimately was able to double over my tenure there.
I think the last three years, I've been, really 3+ years, at Baxter, and most recently as the CFO of the Health Systems and Technology segment. I think a big part of the reason that I went to Baxter was to get more deeply into operational experiences between playing a big role in the integration of Hillrom to leading some different growth and operational initiatives. I think the leadership experience, the growth experience, the operational experience are key for kind of this role. I would add to that that Hillrom had a respiratory care franchise as well that I've spent some deep time with over the years, and I think also prepares me well for this role. As far as why I came to Inogen, I'd say it's really three things. One, the people.
Between the leadership members that I met with, the board members that I met with, I really was impressed with the caliber of the organization. I'd say two, I was impressed with the recent performance. Two straight years, mid-single digit growth, some pretty significant improvement in adjusted EBITDA, and the expansion of the portfolio from a portfolio oxygen generator company to a more significant respiratory care platform, and increasing the TAM was attractive to me. I think three, I feel like Inogen's at an inflection point, with a real significant opportunity to accelerate growth and accelerate that margin expansion with some of the moves that they've made. I felt like that's really what I was looking for, the opportunity to contribute to a transformation, and really utilize some of the experiences that I've had over the past.
Lastly, I'd say seven days in, but I continue to be energized by what I've seen and the opportunity ahead, and I'm looking forward to working with the team.
Okay. That's great. Kevin, I think, along with Jason, there were some other senior executives that you hired, including Chief Marketing Officer and VP of US Business-to-Business Sales. Can you maybe just comment quickly on those hires and kind of why those were the right people and the right roles? I don't know if these are new positions that you didn't previously have. If they are new, maybe why you felt like you needed those roles in the company.
Yeah, no. Thanks for the question, Mike. In addition to Jason and looking at the talent development and expansion here in the organization, adding the CMO and the VP of Sales for the B2B, it's a deliberate realignment to reflect the ambitions that we have as an organization and to accelerate the core priorities that we have, driving top-line growth, advancing our path to profitability, and expanding our innovation pipeline. We did have a marketing role that was in Inogen in the past. This is elevating that up, making it a more strategic role. It's reporting directly into me. Dom is a seasoned operator, as is Corey. Corey, our VP of US Sales, he has deep experience in the space. He knows the HME markets. He knows the major players as well as some of the smaller players.
This is us expanding out and upgrading our team to make sure that we are positioned to excel here in the future. As I mentioned, they're both experienced operators, hit the ground running. They're going to be spending the next few weeks really deeply understanding the Inogen business, and then they're going to be able to start to add value. If you think about this, and Jason had touched on this also, but we have evolved from a single product company, for all intents and purposes, the POC, to now a respiratory care platform, with also the development and the expansion of our digital offering as we go into the future.
Bringing in some additional operators here that understand that know product launches, that know how to expand out the portfolio and get to rapid sales to get to that peak sales as quickly as possible, was definitely beneficial for us. We've gone from in the low hundred million range from a TAM in the United States now to a $3.4 billion TAM. We've evolved as a company, and we've added some great talent to go along with it.
Okay. That's great. I just want to start out by touching on some of the kind of macro headlines around the war and oil prices. Maybe you can comment on kind of your exposure to oil prices. Materials I would think of would be raw materials like resins, as well as freight cost. Maybe you can comment on exposure in those items or anything else from a cost perspective.
Yeah, certainly. We've had limited impact here to date with this. We do have resin. We have plastic components and parts in our POCs. We have supply arrangements in place that do give us protection. Similarly with our shipping, we don't do a lot of air freights, we don't do a lot of overnight shipping, so our exposure is perhaps a little bit less than others. If this does continue to carry on for extended periods of time, we see elevated oil prices, there may be an impact in the future, but so far it's been minimal.
Okay. All right. Moving on to your efforts to diversify the company, I want to start with the Voxi 5. This is your new stationary concentrator. Maybe you can just give us an update on the launch and how the product's been received and how you're positioning it relative to the competition.
Yeah. So far the feedback and the acceptance has been exceptional. We've worked with UL to make the Voxi 5 something that is attractive for Inogen, attractive for our customers. We've made improvements to what the original design was on this and added that to the portfolio. We've had good feedback both from our B2B market, being able to offer an Inogen package. We've been able to expand out the number of touches that our sales reps can have. That's more engagement. Start to think about portfolio sales within that B2B segment. We've also positioned Voxi 5 within the DTC. If you remember, this is the expanding out the portfolio, but it's the same patient, it's the same call point, and it's drop through to the bottom line within that channel, within the B2B as well as the DTC.
Because the same patient that needs a POC also needs to have a stationary concentrator. There are also patients that need to have a stationary concentrator before they need to have the POC. It's a nice expansion.
Okay. I know that was part of the agreement you have with Yuwell. The other part of that agreement was that they were going to start selling your POCs in China. I don't think that's happened yet, but just wanted to see if you could give us an update there, if you have any sense of the timing of when they could get the clearance and start selling it there.
Yeah. We've not guided towards the exact timing with that yet. We're working through the regulatory process to bring our POC into China, and we're working with Yuwell in that process to bring it in. That is an attractive market for us. There's a high rate of COPD. It's a growing patient population, not just from the smoking that is historically been part of the Chinese culture, but it's also the environmental factors when you think about the pollution and the impacts from the environment there. It's an attractive opportunity for us. We're excited about this, and remember, as we've mentioned before broadly here, we're entering the Chinese market as a premium play, as a premium opportunity for the market there. There are POC players. There's a well-established stationary concentrator business.
It's more SOC than it is POC today. That's a growing opportunity and it's our ability to leverage Yuwell here.
Okay. Is the main hurdle just getting the product through the regulatory approvals there?
It is. It's coming in as a Chinese company going through the regulatory process. We're working through that, the appropriate documentation, testing, and so forth that is necessary there for China. We're excited about what that'll bring us.
Okay. All right. Moving on to Simeox. Maybe you could just give us a quick reminder on what the product is and the market opportunity, and then where things stand with launching it in the U.S. and obtaining reimbursement coverage.
Sure. Yeah. Simeox is an expansion out from the oxygen therapy, which is our POCs and the SOC line. Similar overlapping patient population, but it's airway clearance. It's bronchiectasis, more specifically non-CF, so non-cystic fibrosis bronchiectasis. Airway clearance, so you have patients who have sticky mucus that's developed in the airways. The traditional therapy for that is either going to be a PEP or OPEP type device, which are very ineffective with large portions of the population, or stepping up to something like a vest technology, the HFCWOs, which is an externally worn device that can be effective with clearing the mucus. The way that the Simeox works is through a tube that the patient uses in their mouth to breathe in and out of, and it applies through the waveforms.
Basically what it does is a similar action, a similar result that you would get from the vest, but it breaks up the sticky mucus, makes it more movable, allows the patients to clear it comfortably on their own without having to wear a device, without having to have bulky technology to go along with it. We have that on the market in the European countries today. We have seen success with that. We're working towards the reimbursements in Europe as well as the reimbursement in the United States. We have a clinical trial that is ongoing in the European markets that will allow us to go after specific markets there. Think about the Big Five and so forth within Europe. Within the United States, while we have clearance from the FDA, we're working towards the process to file for reimbursement with CMS.
That is, we require a couple of clinical trials in order to do that. One, safety efficacy, another trial which does a comparative trial. We're working through that process. We're enrolling actively here in the States with the first trial. We haven't guided towards specifying the timeline for that, but this does expand our TAM, gives us about a $500 million growth with high single-digit market expansion and attractive gross margins. This is one that is going to be very nice, accretive for us. It's a razor/razor blade model, which is different for Inogen, and we're excited about this one too.
Okay. Just moving on to the other market you're entering is the CPAP market with your Aurora mask family.
Yep.
Why enter the CPAP mask market, and how are you positioning these products relative to the market leaders in that market?
Yeah. The CPAP's similar to Simeox. When we think about the overlap with COPD, that's our core patients. It's the COPD patient population that are on long-term oxygen therapy. When we think about that expansion, and I know I'm going a little bit backwards here, but Simeox, there's that overlap of about 30% of the patient population, roughly, that has bronchiectasis and needs airway clearance. Arguably, there's also evidence that suggests it's further than that and the necessity for airway clearance outside of a bronchiectasis diagnosis. If you roll forward here to consider Aurora and the CPAP masks, it's a growing market. It is a $2.2 billion TAM in the United States, and there's also that overlap within our core patient population of about a 20%-30% overlap. It's a nice extension.
We're leveraging the sales organization that we have, the logistics that we have, the marketing teams that we have. It's the same physician that's prescribing the CPAP machines and masks as it is the physician that's prescribing long-term oxygen therapy and also the bronchiectasis diagnosis. These are the pulmonologists for the most part. There's overlap within the HMEs. We know there are thousands of HMEs out there, and there's strong overlap within the HMEs that support patients that are on CPAPs, those sleep-related patients, as well as the oxygen therapy. It's a good way for us to leverage what we have. The way that we're approaching the market and positioning ourselves, we took the time to make sure that we are able to deliver a high-quality product that can be differentiated and will come with patient preference.
We ran the clinical trials ahead of time, looking at three cohorts of patients, and wanted to validate that what we were doing was worthy of the Inogen name, had the same quality, that standard that we have as Inogen, and would also be able to support patient preference. We were very excited with the data that came out in that. We have a publication which will be coming out soon, presented at a sleep conference. We like the feedback that we've been seeing so far, but this is us being able to leverage the same patient, the same physician, and the same customer base when you think about the B2Bs.
Sure. You said the TAM is $2.2 billion, but I think you more recently have commented on the segment of that that's kind of the new patient setup, because that's probably where you have more opportunity. It's harder to get an existing patient to switch masks. How big do you think that portion of the market is?
Yeah, that portion of the market, it's been estimated in the reports that we see, Mike, at $400 million-$500 million-$600 million. I've seen some go to the high end. We are focused on the $400 million on the conservative approach there. Those are the patients that are the early startups. We see it being roughly around 30% of that population, but more conservatively $400 million, because it depends, of course, throughout the year when that patient is going to be diagnosed. That is when a patient is on a mask. Once they get comfortable with a CPAP mask, it's hard to get them to change to something else. You've got a good night's sleep, you're happy with it's sticky, they stay with it.
When we did our clinical trial, we looked at patients that were already happy with the mask that they had, put them on the Inogen mask, and went through the process to evaluate the effectiveness of that and their preference as they went through. We were very happy that they strongly preferred ours and indicated they would switch to ours. That is what we're not realistically, though, going after this $2.2 billion to start. We're going after those new patient startups, and those will build up and add over time.
Okay. The other thing I think you're working on is adding or enhancing the connectivity of your oxygen concentrators. Can you maybe give us an update there and what are the benefits to both the patients and the HME customers from doing that or offering that?
Yeah, certainly. Where we are, first of all, to be clear, all of our POCs have connectivity today. They have Bluetooth enabled. They can connect to smartphones. We have an app that we have developed for patients. We're expanding that out. We're introducing additional robustness in the future to this connectivity, and we're continuing to add features and benefits that will support the patients, the physicians, as well as the B2B. When we look at this from a patient standpoint, we're looking at and having fewer disruptions to their therapy. We're looking at them being able to reorder supplies, to be able to update some of their insurance information and so forth that they need to do and interact with the POCs. That's today. I'm not talking so much about the future here right now, but it enables additional benefits.
For the physicians, the goal here is to get to the TAMs and to the RPMs. That is creating preference and loyalty and also additional revenue streams in the future. In the near term here, that's available today also for the DMEs is that they have the ability to look at device health. They can look at POCs that are going to need service soon, predictive data that's coming out of that, and so they can do route planning with their technicians and their drivers and so forth and put that into the plan rather than have to worry about an emergency call over the weekend where they're paying a technician additional money to take care of and service a patient.
All of this is part of us creating this ecosystem and enabling not just the connectivity and the individual touchpoints, but a broad-based view of attacking loyalty and preference for Inogen.
Okay, got it. Moving on to the DTC rental business, there was a period of strong growth for a few years, but the last few years it's slowed down and it's actually been declining. What happened there and can you get this business back to sustainable growth?
Yes, when we're looking at the direct business and the rental business, which is Inogen as an HME for all effective purposes here. If I step back for a second, demand is increasing. Total volume has increased a little more than 20% when we look at 2025 from a unit volume basis. We're growing in other areas. We're growing in the B2B business. What we see is the dynamics that are linked together, where the HMEs historically have been more willing to give a patient an oxygen tank when they are prescribed portable oxygen therapy. Historically, we saw just a few years ago where it was 30%-40% of the patients on the new starts were given a POC. 60%-70% of those patients were given an oxygen tank historically.
Today, we've seen that flip on its head, and now it is 60% of the patients that are engaged with an HME are being given a POC. You see that reflected in our growth. At the same time, that's a headwind for the rental business as well as our DTC cash-based business because the primary customer in those direct models are patients that are given an oxygen tank and are self-advocating to say, No, I want to have a POC. Where more of those patients are starting out with a POC, it creates a bit of a headwind in one channel or two channels while it creates a tailwind in another channel.
Okay. Yeah. Just because it's a headwind there, but it's being offset by winds on the DTC sales side.
That's right.
Because ultimately, the POCs have to come from somewhere, right? Okay.
Yep.
Speaking of DTC sales, let me focus there for a minute. I'm talking the consumer sales element. That's also been declining. Is that due to the sort of the same reason that you just described?
It is. It's that headwind. It's more the patients that have a POC to start with from their HME, have the Inogen coming from the HME versus who will need to reach out to us to get one directly. We do still continue to see opportunities, and we're refining that business. We've invested in making sure that we have the right size of the organization, the right level of spend within that organization to get us to the point where we can get back to profitable sales. It's not only going to come from POCs in the future with the DTC, it's also going to come from other technologies that we can put through there. We are selling the Voxi 5s, for example, today through the DTC channel.
We see opportunities to continue to build that out and refine the way that we're approaching the marketing there with social media and looking at extended caregivers, family members, and so forth, not just the patients themselves.
Okay. All right. All these new products that you're launching, you mentioned Voxi 5, then Simeox and the CPAP masks, those will all be available through that DTC channel as well, correct?
Yeah. When we're evaluating markets, product launches, we're going to be looking at this as what is the best channel for each product category that we have and the opportunities that are within there. If we look at DTC, there is an opportunity for the Aurora masks to go through the DTC channel as well. That's a much smaller percentage of the CPAP mask business. Patients that are paying out-of-pocket cash for that are mostly those patients who are non-compliant, so they're not having insurance reimburse it because they use it less frequently than they should be using it. There is an opportunity there for cash pay. The bigger market for that one, of course, is going to be within the B2B HME channel. Simeox, as we evolve that and launch that, it is a missionary sale from the beginning with this.
It's a differentiated technology, but there'll be opportunities in DTC as well.
Okay. Moving to domestic B2B sales. You already addressed this to some degree, I think, but it sounds like these larger national and regional companies are really in the midst of shifting a lot of their patients to POCs. Is that fair? I guess what happens when they get to the vast majority of the patients being on a POC and they have a fleet of POCs, does that demand kind of slow down, or is there going to be a replacement market where these things only last five years or something, have to be replaced?
Yeah. We've got a little bit of ways before we go for that saturation of the market where it starts to become a replacement-only market. The way that we are approaching this is one, and thinking about this is one, that roughly 40% of the new patient starts are receiving a tank and not a POC. There's still opportunity to continue to build and to grow within that. We know that there are thousands of HMEs that are out there. You've got the small mom and pops, you've got the big national ones, you have regional players in between. They're not all created equal. They're not all focused in the same way. We have the opportunity to continue to build and grow within there without it even being just a market share within other POC manufacturers.
We're also innovating and setting ourselves apart for the future, not just for where we look at Inogen as a competitor to tanks and other technologies, but also how do we leverage innovation that we have planned in the future to speed up some of the replacement market when it ultimately gets to that, because now we're offering more advanced technology with potentially better outcomes as well.
Okay. What about the pricing trends and specifically with POCs in this channel, is it stable? Is there still a lot of pricing headwinds and competition there? I understand you guys have kind of the best product with the best durability, but is that enough to kind of allow you to continue to capture share?
Yeah, we have a strong feeling that there's differentiation, and it matters. We've been working towards making sure that we maintain the price that our customers see the value for that, and that we have preference from the physicians. One of the evolutions that we have talked about from Inogen going from a single product company, a POC, to a home respiratory care company, that's an important piece. Another part of that is evidence-based, that we are developing evidence-based data to be able to support our continued growth as well as support the value that we are demonstrating. There are some things that we can point to very easily. When you look at total cost of ownership, you compare an Inogen POC to somebody else's for the B2B market.
Things like a sieve bed that the patient can change on their own without requiring a technician to go out with a tool. We have an eight-year useful life versus a five-year useful life, so that enables the HMEs to depreciate it over a longer period of time and it has a potential impact there. They're serviceable. Not all POCs are serviceable that are available in the market today. Plus we have sieve bed technology. We have some things that are meaningful for us, that are important. The other part of that is the evidence generation and the data and the clinical aspect work that we're doing here right now, engaging with clinicians. We have clinical trials that are running. We have a fellowship program that we are launching later this year, and as well as KOL engagement education for physicians.
We're putting in the groundwork to make sure that we continue to separate and differentiate and make sure that the POC market stays far from a commoditized market.
Okay, great. I want to move on to some financial questions. You grew by around 6% in 2024, 4% roughly in 2025. It's probably splitting hairs a bit, but it did slow down a little from 2024 to 2025. This year you're expecting 5%-7%, I think, is your guidance. What caused the modest slowdown last year, and what do you think is going to drive the stronger growth this year? I imagine part of it's the new products. I guess with the CPAP masks and Voxi 5, why can't it be even faster I guess this year?
Yeah. When we look at the revenue growth from 2024-2025, starting out with that first part, that is really driven by mix, that mix going more from the rental business and the DTC cash-based business to more of the B2B, where that growth is being driven there. There are volume-based discounts within these large HMOs. They pay a different amount than individual patients is going to pay. That is reflected there, even though we're continuing to grow from a demand unit volume basis. We do anticipate continued growth and opportunity within the POC.
In order to get to that 5%-7% growth as we guided now, that is based off of our belief and our expectation and that we see the pathway there where we're going to continue to grow beyond the market growth within the POC business, but then also adding in the Voxi 5 and adding in the Aurora masks. We want to be very thoughtful in how we are approaching those markets and those launches because the Voxi 5 is going, yes, to the DTC, but it's a little more chunky in the B2B, and that takes a little bit of time to build that up. The real one that takes the longer runway, and we're at the early stages of the growth curve on this and the launch phase, is the Aurora mask. We build those up really one patient at a time.
We do anticipate that to have a meaningful impact this year, but it's going to be more back-end loaded than it is front-end loaded. That is part of our growth plan.
Okay. Got it. Looking at the P&L, the gross margin was also down a bit in 2025. I know it's complicated with Inogen because of all your different channels having different margins. Was the decline mainly driven by just the shift away from the DTC and toward the B2B channel, or was there more to it?
No, I think you pretty much hit the nail on the head there, Mike. It's mixed. We saw large portions of the revenue come from the B2B channel, where again, those volume discounts, they pay less than others. We're growing faster than the market from a unit volume basis there, but more of it is coming from the lower price segment of the market.
Okay.
Yeah, maybe I would add there too that I think a big part of the product launches we've been talking about is a big component of that expanding margin going forward.
Yeah.
I would also highlight that even with the margin decline, adjusted EBITDA moved forward substantially.
Yeah.
I think the company's done a good job of managing the full profile of the P&L, which we're going to continue to do.
Okay. Yeah, that leads into my next question. The new products, Voxi 5, the Aurora mask, and Simeox, the masks and Simeox clearly have higher gross margins. As those ramp, I'm not so sure on Voxi 5, I don't think you guys have really commented there, but at a minimum, the mask and Simeox should drive higher gross margins, I would think. Is the expectation that as we get into the next few years, that gross margins can start to expand over time?
Yeah. One of the things that we've talked about, and you nail it there with both the Aurora masks and the Simeox, are nice margin profiles for those accretive to the blended margin going forward. We've talked about adding an additional product on an annual basis, every year having a new product launch. We are committed going forward that new launches will be accretive to the blended margins. That'll work towards improving that profile.
Okay. To Jason's point on the EBITDA margins, looking at your OpEx, now this is on a GAAP basis, but dropped from $197 million in 2024 to $185 million in 2025. Can you point to what caused the decline there? Were there any kind of one-time expenses maybe in 2024, or was it just simply leverage? I guess it wouldn't be leverage because it's a dollar amount, not a percentage, but I guess what drove that decline?
Yeah. It's kind of a combination really of those that you talked about there. We've guided to roughly 6% at the midpoints there. We expect that to drop through. We have a mix shift that is happening. We are maintaining the diligence, the discipline that we need to have from an OpEx spend standpoint. That really is blended throughout that.
Okay. Just from a cash flow perspective, it looks like your cash flow from operations was positive, $6 million in 2024, and then it became negative in 2025. What drove that change, and what's the outlook for 2026 and beyond? Do you expect to get back the positive cash flow?
Yeah. I think it's a couple of things that are probably important to note there on the 2025 is we did have an earn-outs payment of $9.8 million.
Okay.
Just under $10 million. That was related to the PhysioAssist acquisition, and so that was paid in 2025. We also had some accounts receivable, higher accounts receivable at the end of the year. That was reflective of orders that were shipping right at the end of the year, and we had some bulky orders there. Some FTE expenses that's related to one, the severance payouts. Severance payouts as we are rightsizing the organization, making sure that we got the right number of people in DTC, as an example, as well as some additional adds for us. Those were all one-off things there, and we haven't guided towards cash flow here in the future.
Okay. All right. You do have a good cash position and no debt. I think it's around $120 million as of end of last year. I think the Board authorized that $30 million share repurchase program. Do you intend to fully utilize that? Have you been active in terms of repurchasing shares at all?
Yeah, we do believe that our stock price is undervalued, and we've improved the profitability, as Jason had noted a little bit here at the beginning. We've got our strategic repositioning. We've expanded our portfolio. All of these are lining up. We're executing, we're moving forward, but we believe that we're undervalued. The Board has authorized that $30 million share repurchase program that you had mentioned that was authorized on February 24th, and we do intend to execute those buybacks over the next couple of years.
Okay.
Yeah. We have started the buyback already. We'll give an update when we do our earnings release next month.
Right. And then finally, just as you continue to try to diversify the company, is there any potential for you to do any M&A, or is that off the table at this point?
Well, our immediate focus here now is the launches that we have and that we've put out with the Aurora masks, with the Voxi 5, getting Simeox launched. We are evaluating. We do continuously look at that. It's in our best interest, it's in the shareholders' best interest. We'll make decisions if we find an opportunity, a target that we believe will increase shareholder value.
Great. All right. Well, I think we're almost out of time, and I'm out of questions, so I think we're going to have to wrap up there. I don't see any questions from viewers. Thank you, guys. Hope you have some good meetings at our conference.
Appreciate it, Mike. Thank you.
Yeah. Thank you, Mike.