Inogen, Inc

Greetings. Welcome to the InnoGen 2022 fourth quarter financial results. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I'll now turn the conference over to your host, Agnes Lee. You may begin.

Thank you, Charlie. Thank you, Charlie. Thank you for participating in today's call. Joining me are CEO Nabeel Shabshab and CFO Kristen Kaltreider. Earlier today, Inogen released financial results for the fourth quarter of 2022. This earnings release is currently available in the investor relations section of the company's website, along with a 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 2023 and beyond, expectations related to our financial results for 2023, expectations related to a return to profitability in 2023, expectations regarding increasing productivity of our internal and external sales teams, progress on our strategic initiatives, including innovation, our expectations regarding the market for our products, on our business, and supply and demand for our products in both the short-term and long-term. The four looking statements in this call are based on information currently available to us as of today's date, February 23rd, 2023. These four looking statements are our only predictions and involve risks and uncertainties that are set forth in more detail in our most recent periodic reports filed with the Securities and Exchange Commission. 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 presentations 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 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 tables within our earnings release. With that, I will turn the call over to Inigent's President and CEO, Nabeel Shapshot. Nabeel?

Thanks, Agnes. Good afternoon, and thank you for joining our fourth quarter 2022 conference call. 2022 has been a testimony of the team's ambidextrous leadership, as evidenced by our ability to progress the needed transformation while delivering revenue growth despite the multiple challenges, including macroeconomic and inflationary headwinds that presented themselves during the back half of 2022. In addition to building a healthy innovation pipeline, we continue to evolve capabilities, processes, and systems that can deliver durable and profitable growth in the medium to long term. I would like to first start by addressing our performance in the quarter. Although we have grown revenue and overcame multiple challenges, we fell short with regards to scaling the needed changes in DTC within the timeline that we originally anticipated. Naturally, this had an impact on revenue mix as well as on gross margin. As we look ahead to 2023, we are confident that our continued progress around commercial excellence and closely managing operating expenses will contribute to our goal to drive adjusted EBITDA improvement in 2023 in an environment where we are seeing moderated revenue growth. Before I walk through our strategy, I would like to provide some context about our commercial transformation, progress on our innovation, and an update on the supply situation. A key element of strengthening allegiance performance in the short to medium term is driving commercial excellence. In that respect, our efforts over the past 21 months relating to several commercial pilots have informed changes in our go-to-market strategy within and across channels. We have made excellent progress in strengthening our prescriber channel go-to-market capabilities and delivering solid growth of 23% in 2022 after only standing up and scaling the prescriber team in mid-Q1 2022. We believe that we can continue to drive growth and productivity in the prescriber channel, allowing us to serve more prescribers and their patients in need of our best-in-class POCs. We have also demonstrated the potential to drive productivity within our direct-to-consumer channel whilst the evolution has been slower than expected. We have continued to apply the learning from the pilots as we set up for scale to deliver a stronger second half of the year in DTCs. The process of piloting and beginning to institutionalize the envisioned improvements in BTC had an impact on our fourth quarter sales, and we expect continued impact in the first half of the year with improvements in the second half of 2023. We have announced an investor event on Monday, February 27 to allow for more engagement with investors and to share productivity metrics, our evolving channel strategy, and the progress on the overarching growth strategy. This year, we plan to drive further differentiation for Imogen and COPD with anticipated new product launches in 2023 in the US and Europe after securing the necessary regulatory appearances. Our focus on innovation-led growth extends beyond the 2023 launches, and we look forward to sharing more detail during our strategy overview on February 27, including how we plan to expand addressable patient population, add indications, and extend binogens impact beyond oxygen therapy and COPD. Finally, in 2022, we were successful in our efforts to effectively manage the supply chain challenges. We expect the supply situation to gradually get better in 2023, and we have good visibility for the first half of the year due to a combined effort of securing additional forward buys in Q4 2022 and improvements in the regular supply channel for semiconductors. Open channel purchases of semiconductors remain a part of our efforts to ensure supply continuity, and as such, during 2022, we continue to forward buy semiconductors where the premium paid will impact product costs until we sell through all of the parts acquired at higher prices. This strategic decision has helped us ensure supply continuity through the first half of 2023, improve visibility into Q3, and is a strategy that we will continue to use selectively if and when required. As a result of improving supply visibility and the progress that we have made with our commercial resolution, we will be issuing annual guidance for 2023, and Kristen will go into more detail later on in the call. I would now like to move to an update on our growth strategy. As our strategy evolved, core tenets remained constant as it relates to balancing investment choices to diversify our portfolio, deliver scalable growth, and allow for a return to profitability in the medium to long term. We continue to characterize our growth strategy in terms of short to medium term and medium to long term horizons with multiple growth vectors for each. The short to medium growth strategy focuses on two vectors. The first is to drive POC-based oxygen therapy by primarily using the strong portfolio in place while improving productivity and efficiency of our commercial operations. The second vector relates to driving differentiation and growth through new product introductions that will expand the portfolio choices for current COPD patients, serve more advanced COPD patients, and start to expand the indications we address. While remaining focused on the short to medium term, commercial and pricing excellence in existing channels and portfolios has been a key focus over the past several years where we have made good progress. The major focus was serving patients downstream through our DTC team who is focused on cash sales predominantly. At the beginning of 2022, we subsequently evolved our strategy and directed our investments to stand up a prescriber channel that enabled us to serve patients upstream at the point of diagnosis and prescription. This model is analogous with the patient diagnosis, prescription, and buying journey and maximizes the opportunity of placing COPD patients on the most appropriate oxygen therapy modality throughout their disease management journey. This patient-centric model, which is agnostic to channel boundaries, should accelerate patient and prescriber adoption of Inogen's POC-based therapy, driving scale, predictability, and profitability over time. The progress in the prescriber channel, where we saw 23% year-over-year growth during 2022, is core to this new model. Our patient-centric model also lends itself to advancing energy and partnership with HMEs in the US and distributors internationally. Our vision of patients and prescribers having access to the most appropriate oxygen therapy modality across channels and service providers offers an opportunity for partners to drive growth while better serving patients and prescribers due to patients predominantly favoring POC-based oxygen therapy, according to our primary research. Additionally, We strongly believe that a more balanced operating model of delivery and non-delivery will also serve as an opportunity to improve the overall economics of an HME or distributor and improve their profitability over time. As part of refining our overall channel strategy, DTC remains the critical driver of our success as we improve productivity and efficiency in that channel based on the pilots we ran in Q3 and Q4. We continue to believe that all of these channels, whether DTC, prescriber, or B2B, have a place in our business model and we are moving to the next steps to optimize our commercial strategy so that we are well positioned for both growth and profitability. New product introductions also have a role in driving differentiation and growth in both the short to medium and medium to long-term horizons. Staying with the short to medium time horizon, In December 2022, we started selling Rope 6 in European markets that grandfathered reimbursement upon the receipt of the EU MDR certificate while fulfilling orders for G5 and other markets that required reimbursement renewal for the newly introduced POCs. At that time, we also initiated the sequential process of securing reimbursement for Rope 6 in two European countries that do not grandfather reimbursement. We are pleased to share that we have successfully secured reimbursement in Germany ahead of our expected timeline, and our team has resumed its efforts to commercialize the new Rho6 device in that market through our distributor partners. The review of our reimbursement file in France is progressing, and we will keep you updated with respect to the anticipated completion date of late Q2 2023. Additionally, in December 2022, Inogen received FDA clearance for the Rho4 and we anticipate the U.S. launch to be in the back half of 2023. We are excited about these launches as an important and imminent next step as we continue to lead MPOC innovation. Shifting now to the medium to long-term growth strategy, I would like to quickly cover the two vectors involved at the high level on this call while allowing for a more thorough discussion at the investor event on February 27th. The first vector relates to continued efforts around market development for POC-based oxygen therapy, predominantly through clinical evidence and collaboration with our scientific advisory board and key opinion leaders. We are making good progress on our clinical strategy and anticipate sharing some of the results through scientific conferences and publications during the second half of 2023. The second vector relates to innovations that expand the indications and patient populations we serve. We are making encouraging progress and will be sharing the overall innovation roadmap that strengthens our COPD-focused portfolio and allows us to additionally serve patients with congestive heart failure, dyspnea, and potentially hypercapnia in the medium to long term. We will be discussing this in a bit more detail during our investor event next week. Lastly, as we advance our innovation strategy to serve patients beyond COPD, we remain open to potential acquisitive growth opportunities that would support our aspiration for imaging becoming a more comprehensive respiratory care company. In summary, we see that underlying demand for our offering remains steady, and we have recently received data demonstrating a modest rebound in COPD diagnosis that we are projecting to continue in 2023. We expect supply visibility to continue to improve, and as such, we are providing revenue guidance for the full year. In addition, we are confident that the evolution of our channel strategy to support our patient-centric vision will allow us to serve more patients, drive growth, and chart the path back to profitability at the end of 2023. I look forward to talking further about our commercial and growth strategy at our event next Monday. I will now turn the call over to Kristen. Kristen?