Inogen: Conversion to POCs now has 'substance'

GOLETA, Calif. - Company officials at Inogen say they had record financial results for the second quarter and there are a number of signs that point to an even better second half of the year.

Chief among them: Sustained increases in Inogen's domestic business-to-business channel, growing proof that providers are moving to portable oxygen concentrators and non-delivery business models.

“We said in the past that we needed a little bit more time in the pickle barrel to really see if there's a conversion process or not,” said CEO Scott Wilkinson during a conference call with analysts. “Now we're about a year, a year and a half down the road from when I made those initial statements and clearly the market is moving that way. I would caution it's still going to take seven to 10 years for the market to convert, but when you string that success over several quarters, there's some substance to that.”

Sales in the domestic business-to-business channel increased 32.2% in the second quarter, exceeding expectations, Wilkinson said. Sales in the direct-to-consumer channel increased 33.3%, also exceeding expectations, he said.

A small bump in the road expected in the third quarter, especially in the direct-to-consumer channel, will be a new CRM system that Inogen launched in June that will likely mean a temporary hit to productivity.

“We believe this system will help improve productivity of our sales, customer service and billing department, especially as we look into 2018,” Wilkinson said. “Although our second quarter sales numbers were strong, we do expect to see a short-term decline in productivity in these departments during the first few months post implementation, while we invest in training and our employees work through the learning curve in the new system.”

But that hit will be more than offset by sales reps “coming up the curve,” said CFO Ali Bauerlein. Inogen began training its first class of sales reps in August for a new facility in Cleveland that will employ 240 at full bore.

“You should be thinking about the second half stronger than the first, while the second quarter was great,” Bauerlein told analysts.

As a result, Inogen increased its guidance range for 2017 revenues to $239 million to $243 million, representing year-over-year growth of 17.8% to 19.8%, compared to a previous guidance of $233 million to $239 million. It increased guidance for net income to $25 million to $27 million, representing 21.8% to 31.6% year-over-year growth, compared to previous guidance of $22 million to $24 million.