Inogen, Inc

Welcome to Indigent's third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session. To ask a question at that time, please press star followed by the one on your touchtone phone. If anyone has difficulty hearing the conference, please press star zero for operator assistance. As a reminder, this conference is being recorded today, November 2nd, 2022. I would now like to turn the call over to Agnes Lee, Senior Vice President of Investor Relations and Strategic Planning.

Thank you, Brock. Good morning, everyone. Joining me today are Nabil Shabshab, President and CEO, and Kristen Kaltreuter, our CFO. Earlier this morning, we released financial results for the third quarter of 2022. This press release is available in the investor relations section of the company's website, along with the supplemental financial package. As a reminder, the information presented today will include forward-looking statements, including, without limitation, statements about our growth prospects and strategy for 2022 and beyond, Expectations related to our financial results for the fourth quarter of 2022 and expectations related to a return to profitability. Our expectations with respect to supply challenges and cost inflation related to semiconductor chips and other product parts used in our POCs. Our expectations on European regulatory clearances and approvals. Future reimbursement rates. expectations regarding increasing productivity of our internal and external sales teams, progress of our strategic initiatives, including innovation, hiring expectations, our expectations regarding the market for our products on our business and supply and demand for our products in both the short-term and the long-term. The forward-looking statements in this call are based on information currently available to us as of today's date, November 2nd, 2022. 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 SEC. Actual results may vary and we may disclaim any obligations to update these forward-looking statements except as may be required by law. We have posted historical financial statements and our investor presentation in the investor relations section of the company's website. Please refer to these files for more detailed information. During the call, we will 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 non-cash 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 the tables within our earnings release. With that, I will turn the call over to Inogen's President and CEO, Nabeel Shabshab.

Thanks, Agnes. Good morning and thank you for joining our third quarter 2022 conference call. I'm incredibly pleased with our team who did a tremendous job of fulfilling our B2B backlog orders from Q2, as well as driving revenue in Europe in the countries where we were granted delegations or exceptions. We have also demonstrated excellent progress against our prescriber strategy that we started at the end of Q1 2022 delivering excellent growth and contributing to the strong performance this quarter. The extraordinary efforts of our team resulted in third quarter year-over-year constant currency revenue growth of 14.5%. Similar to the other MedTech and consumer health companies, we are focused on understanding and addressing, to the extent possible, emerging risks associated with the unprecedented ongoing market conditions. Macroeconomic and inflationary pressures are generally outside our control, hence we are acutely focused on levels in our control to mitigate part of those risks and more critically, stay the course with our transformation aimed at delivering durable and sustainable growth and a return to profitability in the medium to long term. Hence, during this call, I would like to take a moment to frame our strategic initiatives and time horizons, then address how we are managing the remaining supply chain challenges update on the progress around commercial excellence and productivity, and share initial thoughts on optimizing operating expenses. These elements are intended to help deal with some macroeconomic and market headwinds and more importantly, continue to drive the ongoing transformation. Let me cover our strategic pillars and related time horizons first. Our strategic pillars include driving oxygen therapy, market penetration, and accelerating new product introductions in our core markets while diversifying our portfolio. At the right time, we plan to expand our portfolio, channel, and global presence through inorganic efforts. We see our strategic initiatives organized across three time horizons that build durability and sustainability and top-line growth and enable the long-term aspiration of returning to profitability. In the short term, with the best-in-class portfolio in place, commercial excellence and execution remain our primary focus. Efforts and investments are focused on standing up, enabling tools and systems, instilling high rigor and discipline in sales management, and optimizing our talent base to drive sales and service productivity and expand market penetration. In the medium to long term, while building on the expected market position as a result of the ongoing commercial execution, we anticipate introducing a pipeline of new and improved POCs, including a next generation POC and a device-less offering that will include value-added digital health services that will benefit patients and clinicians. In the longer term, organically, we anticipate further strengthening of our portfolio with further new product introductions to address new patient populations and indications in oxygen therapy or combination therapies and making digital health value-added services a core pillar of differentiation and growth. Inorganically, we continue to look for opportunities that align with our strategy and help accelerate growth and profitability. Our R&D and product development unions are accelerating their efforts to drive innovation and hence new product introductions in the medium and long-term to drive growth. Additionally, across the medium and long-term horizons, we plan to iteratively build a dossier of clinical and potential economic evidence to drive advocacy for POC-based oxygen therapy for COPD and beyond. Turning to supply chain, we have continued the relentless focus and investments to secure semiconductor inventory. Our team's diligent and persistent efforts continue to help us mitigate most, but not all, supply chain pressures by actively managing our regular suppliers, proactively sourcing parts on the open market when possible, and redesigning our products to work around certain acute shortages. We have made notable progress in managing supply chain challenges this year, but see some uncertainty continuing at least into 2023. With respect to commercial excellence and productivity, we have made steady progress this year, building our prescriber team, working towards optimizing our direct-to-consumer overall team performance, and strengthening our B2B organization and strategic account management. For our rental business, we have increased revenue more than 25% for the first nine months of this year compared to the same period in 2021. We have continued to refine our coverage and targeting strategies to add new target prescribers while increasing referrals from existing and new prescribers. Additionally, we have been actively expanding our market access to secure coverage from private payers as most patients in the prescriber business are expected to be rental patients. We recently added Humana with approximately 25 million covered lives in the U.S., which is expected to drive sales productivity by expanding the overall number of prescriber referrals that we can convert to rental patients. We are incredibly pleased with the solid results delivered by the prescriber team and with the ongoing efforts to further refine our go-to-market strategy, and we see a path to improve productivity and accelerated performance in 2023. For our BTC business, we have continued to build and refine systems and tools that enhance our ability to be more data-driven in our efforts to improve sales management, drive productivity, and optimize performance. We are also continuing with our newly developed disciplines around talent selection, development, onboarding, and training. As a result, we are seeing notable acceleration of the productivity ramp for new sales associates, as well as improvements in conversion rates across the organization. As we continue to enhance our commercial leadership and disciplines, we are already seeing notable and promising productivity improvements across our direct-to-consumer and prescriber teams that we plan to institutionalize and scale during 2023. Turning to our aspirations of returning to profitability, I would like to reiterate that the price increases we took successively in September 2021 and March 2022 were aimed at mitigating margin compression and are expected to flow through RP&L, especially when the incremental supply chain-related costs abate late 2023 and beyond as currently expected. Macroeconomic challenges could present certain headwinds in the short-to-median term, but we remain committed to funding prioritized growth initiatives in support of our long-term growth aspirations. As we look towards 2023, we will further focus on operating expenses, including optimizing commercial operations, supplier management and dual sourcing, and process optimization, as well as diligent overall operating expense management. In support of these initiatives, in August we added Vijay Paliwal to our leadership team as Emergence SVP of Enterprise Enablement to drive cross-functional process optimization and digital transformation through connected systems, optimized workflows, and on-demand data in support of our productivity, agility, and efficiency goals. Vijay and his team will also play a significant role in re-architecting and delivering a differentiated, sustainable, and scalable experience for our customers and patients. Before sharing thoughts on the horizon ahead, I would like to provide an update on the European regulatory clearances. The review of our European MDR submission is progressing as expected. We are cautiously encouraged by the progress, but we cannot speculate on the timing yet. We will provide an update when we have approval. Our previous strategy to file derogation requests in a number of European countries resulted in receiving exceptions or approval to continue selling our POCs in five countries, including France, where we were allowed to continue commercialization until the end of October, and the UK, Austria, Portugal, and Switzerland until the end of 2022 approximately. As evidenced by our revenue growth this quarter, the underlying demand for our offering remains steady, but we continue to monitor potential headwinds as a result of the ongoing adverse microeconomic conditions and potential supply chain interruptions. Our experience and track record of managing supply chain interruptions should help us navigate similar challenges in 2023 if unexpected supply chain dynamics do not present. At the same time, we are steadily progressing our strategic initiatives to drive productivity in the commercial organization and to strengthen our new product pipeline and build out our clinical evidence dossier. Our strong balance sheet, cash provision, and pricing excellence allow us to manage medium-term cost challenges and continue to execute our long-term strategy and return to profitability. We are making progress on our strategic initiatives, setting us up for scale and return to positive free cash flow late 2023 and beyond. We have short to medium-term visibility into supply of semiconductors, and as such, we are providing revenue guidance for the fourth quarter. We look forward to updating you on our progress in the fourth quarter and providing further information on our opportunities and execution to drive growth, profitability, and value creation. I will now turn the call over to Kristen. Kristen?