Inogen hits bumps

GOLETA, Calif. - In the face of a self-described tough first quarter, Inogen plans to relax its intake criteria for its rental business and slow down hiring for its direct-to-consumer business.

A big reason for the tough quarter: One national provider reduced purchases from Inogen's private label partner to $700,000 in the first quarter this year from $9.3 million in the first quarter last year.

“(But) if you peel back those purchases, the rest of the domestic B2B channel is growing nicely in the mid-30s percent, and we're very pleased with that,” said Scott Wilkinson, CEO.

Overall, domestic B2B sales declined 7% in the first quarter, while direct-to-consumer sales increased 35.9%.

Inogen is playing with the minimum number of billable months remaining that it requires for it to take on a rental patient, Wilkinson says.

“We can relax that criteria and it creates a bigger portion of the leads that come in every month to become rental candidates,” he said. “So that's what we'll be doing. But it's not a massive shift. It's a subtle change.”

Inogen is also testing an intake team specifically for rentals to increase the productivity of that business.

“They are much more efficient because you drive more of the volume through a narrower group of people that are experts in this area, as opposed to our wholesale sales team that may do a rental or two here and there a month and they're just not as proficient at it,” Willkinson said.

This “subtle shift” to rental sales is one reason why the company decided to lower its 2019 guidance significantly to $405 million to $415 million in revenues, down from $430 million to $440 million.

“If you have a patient that previously would have bought for cash, they're now able to use their rental benefits and you're gong to recognize that revenue monthly over time vs. the mostly immediate revenue recognition that you have on the DTC side,” said Ali Bauerlein, CFO.

Slowing down hiring for its DTC business is another reason Inogen lowered its guidance. The company had topped out at 446 inside sales reps for this business by the end of 2018, a nearly 70% increase from 2017.

“When we look at the productivity of reps, they no longer were matching what we have seen from a historical productivity standpoint,” Wilkinson said. “We got a little ahead of ourselves on management. I think we mentioned that in the previous call that we had to shore up our management, but we found we still need to invest in further training on management, so that they're an even better resource for the new reps.”