Inogen, Inc

Welcome to Imogen's second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a question and answer session. To ask a question at that time, please press star followed by one on your touchtone phone. If anyone has difficulty hearing the conference, please press star and zero for operator assistance. As a reminder, this conference is being recorded today, August 6th, 2026. I'd now like to turn the call over to Lorna Williams, SVP of Investor Relations and Strategic Planning.

Thank you all for participating in today's call. Joining me are President and CEO Kevin Smith and CFO Jason Richardson. Earlier today, Inogen released financial results for the second quarter of 2026. The earnings release is available in the investor relations section of the company's website along with a supplemental financial package. During today's call, we will discuss non-GAAP financial measures that we believe provide useful information for investors. This information is not intended to be considered in isolation or as a substitute for GAAP financial information. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental financial package. In addition, our discussion today will include forward-looking statements, including, but not limited to, expectations on our future financial and operating performance. We make these statements based on current expectations and reasonable assumptions. However, Our actual results could differ due to risks and uncertainties. Please review our annual report and other SEC filings for discussion of risk factors that could cause our actual results to differ materially from any forward-looking statements made today. Forward-looking statements made on today's call speak only as of today, and Inogen undertakes no obligation to update or revise these statements except as required by law. The company has not provided a reconciliation of forward-looking adjusted EBITDA to the most directly comparable gap measure because certain items that impact net income are uncertain or outside the company's control and cannot be reasonably predicted without unreasonable effort. With that, I will turn the call over to Indigent's President and CEO, Kevin Smith.

Good afternoon, and thank you for joining our second quarter of 2026 conference call. Starting with the Q2 results, Q2 total revenue came in at $95.1 million, growing 3% year over year, due to a strong international growth POC demand and contribution from our new products, including Voxy and Aurora masks. We believe that our continued strong POC unit volume growth of over 12% demonstrates that we continue to outpace market growth, as we continue to expand international game traction with more U.S. distributors. In addition, we continue investing in product innovation and commercial leadership to expand our presence in the home respiratory care market with a long-term goal of consistently delivering high single-digit revenue growth. US sales were 42.3 million and a quarter as the strong mid single-digit revenue growth in our B2B sales channel was not enough to offset the channel mix challenges in BTC. Results in BTC reflect the market shift We're HMEs are prescribing POCs from day one, and in turn, HMEs are our largest and most strategic funnel. It is important to note that in total, the U.S. segment unit volume was up high single digits, indicating continued strong interest in our products and bolsters our confidence in our strategy. This quarter, we also increased our investments in the B2B sales force, and the team was working across the commercial organization to sharpen execution and align priorities. That investment is already starting to show a return. We significantly increased the number of U.S. customers moving through the B2B sales channel sequentially over Q1. The cost of ownership case we're making the HMEs is compelling. An eight year useful life against the five year industry standard best in class serviceability and a growing body of real world outcomes data. In addition to POCs, Our two new products, Boxy and Aurora, continue to receive positive feedback from patients, physicians, and caregivers. We are starting to build inroads in these markets and are pleased with the progress to date. I remain excited about our passive growth with our core business as we bring new innovation to market. On rental, as more patients enter the long-term oxygen therapy pathway through HMEs with a POC, the traditional funnel for rental is narrowing. While this creates a tailwind in our B2B channel, our direct sales channels are feeling pressured. We are managing the rental business with discipline, balancing growth against profitability. At the same time, we remain committed to ensuring every patient who wants an Inogen device can get one. International was again a standout. Revenue of 41.3 million grew 15% year over year. A mid-team digit expansion sustained across geographies and commercial initiatives. We are penetrating in existing countries and expanding further across Eastern Europe and Latin America while our teams are deepening distributor relationships. Q2 was continued evidence of a repeatable model, and while we do see the timing of select distributor purchases impacting the second half, We expect the trajectory to continue to fuel further growth over the long term. One example of our continued global expansion is the Rogue Six Portable Oxygen Concentrator launch in Canada. Canada has a large opportunity with roughly 2 million COPD patients. This follows Rogue Six's launch in Brazil last quarter, which continues to perform in line with our expectations. These successive launches are the execution of a deliberate international expansion strategy. Entering new geographies, building upon established distribution relationships, and extending Inogen's reach to patients who currently have limited access to high-quality portable oxygen therapy. Profitability is an active priority at Inogen, and we are diligently executing toward it. Our adjusted EBITDA this quarter was $2.4 million, reflecting 15% year-over-year improvements. At the same time, we are conducting a thorough review of our P&L. We have been examining every line of the business with a clear mandate to ensure our cost structure is aligned with our growth priorities and that we are deploying capital to drive growth, expand into large growing markets, or expand the value proposition of our market-leading products. That work is underway and we will share more as it gains progress. Our approach to capital allocation also reflects a simple principle. Every dollar we spend much contributes to building a stronger company and generating sustainable shareholder returns. In practice, that means investing with conviction where we see clear returns, such as the Salesforce expansion, HME channel development, international market entry, and adding higher growth margin accretive products in adjacent markets. Importantly, we generated $2.9 million of operating cash flow and ended our second quarter with $107 million in cash, cash equivalents, marketable securities, and restricted cash, reflecting our strong capital position and ability to continue investing in innovation and long-term growth. We continue to operate with no debt. Innovation remains central to how we generate long-term value at Energy. and this quarter, we made meaningful progress across our pipeline. Specifically, Voxy expands our core oxygen product portfolio as a high quality alternative for home oxygen therapy. To date, we've shipped more than 5,000 units and we continue to receive positive feedback from patients and increase traction with our HME partners. Beyond the encouraging early commercial performance, Voxy addresses an attractive market opportunity. We estimate the SOC market has a TAM of $300 million in the U.S. Importantly, stationary concentrators are a foundational part of oxygen therapy, as virtually every patient who uses a POC also has a stationary oxygen concentrator in the home. By expanding to both POCs and SOCs, we are able to serve a larger portion of the patient's earnings. deepen relationships with U.S. B2B partners and capture additional value within our core respiratory care market. At the same time, we are building traction with Aurora CPAP masks, and we are encouraged by the strong early adoption, having more than doubled our customer count sequentially. We continue to expand the Aurora pipeline and convert those opportunities. We expect this momentum to continue. The clinical evidence confirms what our commercial teams have been hearing. At Sleep 2026 in Baltimore in June, we presented the full results of a 90-day in-home study evaluating experienced CPAP users who are already satisfied with their existing masks. That is a deliberately high bar as these are not dissatisfied patients looking for an alternative. And yet the data showed that they overwhelmingly preferred Aurora. The reception at sleep, the conversations that followed, and most importantly, the growing traction in Aurora reinforced our conviction. We have a product people want to use, and the clinical foundation to prove it. Our U.S. B2B sales reps are deepening provider conversations, and we expect Aurora's contributions to gradually increase throughout the rest of the year. We estimate the U.S. CPAP mass market at approximately 2.2 billion, growing at a high single-digit rate. So every point of market share is roughly 20 million of potential annual revenue for energy. We continue to execute the evidence-driven HME-focused commercial strategy we have already put into motion to make this market meaningful for us. We are also actively building the clinical and commercial foundation to scale CEMIAC. We estimate a US TAM of approximately 500 million in non-cystic fibrosis bronchiectasis alone, growing at a high single-digit rate. The path to access that vast market is through CMS reimbursement, and our IMPACT 200 trials enrollment is progressing on track, with the goal of providing CMS and payers the clinical and economic rationale to cover this differentiated therapy. In China, we completed enrollment and achieved last patient, last visit for the semiax H scope study. We expect statistical analysis results later this year. China represents a significant long-term opportunity in respiratory care, and we are moving methodically through the regulatory pathway to access. While we invest aggressively in new products, we are equally committed to deepening the clinical and scientific foundation of our core oxygen therapy business. I want to highlight our recently published manuscript in the ERS Open Resource Journal, where we introduced a simple oxygen therapy assessment tool known as the Questionnaire for Oxygen Therapy Evaluation, or QOTE. Developed among 14 eminent pulmonologists across the US and Europe, QOTE is a clinical assessment tool designed to improve how patients on long-term oxygen therapy are evaluated and managed. This manuscript demonstrates that engines contributions to respiratory medicine extends beyond our device portfolio. It strengthens our scientific credibility in oxygen therapy deepens our engagement with key respiratory thought leaders and advances the standard of patient assessment and management in the global long-term oxygen therapy market. The early response has been striking. Within days of publication, we received requests for translation into additional languages in interest in further development, validation, and deeper psychometric evaluation. The level of immediate engagement from the global respiratory community speaks to the unmet need this tool addresses. Beyond our current portfolio, we continue to invest in our innovation pipeline, advancing digital health capabilities designed to enhance patient engagement, connectivity, and clinical insights. I would like to take a moment to welcome Andy Reding, who joined Inogen last month as Chief Operating Officer, a newly created role that reflects the operational scale and executional demands of this next chapter. Andy brings more than 30 years of med tech experience across commercial operations, Product Development, and Healthcare Reimbursement. As Chief Commercial Officer of Viant Medical, he led operations across 25 facilities serving hundreds of device companies and delivered exceptional growth over six years. Prior to Viant, as VP General Manager of Hill-Rom Respiratory Health, he held full P&L responsibility and led his team through global Salesforce expansion, new product launches, and successful FDA and CMS navigation. We are glad to have him on board. Today, Inogen operates across oxygen therapy, sleep therapy, airway clearance, and digital health with an estimated combined PAM of over 3.4 billion. Twelve months ago, that number was 400 million. In every investment we have discussed today in leadership, commercial executions, new products, and clinical evidence is oriented towards the same outcome, durable top-line growth and a clear accelerating path to profitability. We remain committed to at least one new product launch per year. And with that, I will turn the call over to Jason to discuss the financial results in more detail. Jason?

Thank you, Kevin. And good afternoon, everyone. As Kevin mentioned, total revenue for the second quarter was $95.1 million, an increase of 3% from the prior year period. Primarily driven by strong international growth, the favorable impact of foreign exchange rates, and new product contributions. For the second quarter, foreign exchange had a positive 240 basis point impact on total revenue. U.S. sales were $42.3 million, down 2% year over year. This quarter, our distributor business benefited from both healthy POC volumes through DMEs and contributions from our new product launches. Looking ahead, we expect U.S. sales to return to growth as these new products continue to gain traction and B2B customers convert patient new starts to POCs. However, the D2C sales channel will continue to be under pressure from the broader market channel mix dynamics. As a result, we currently expect gains in the US B2B sales channel to be partially offset by continued declines in DTC in the second half of the year. International sales were $41.3 million, up 15% year-over-year. This marks the 10th consecutive quarter of double-digit growth of our international sales. U.S. rentals were $11.6 million, down 12% year-over-year, reflecting the continued and structural sales channel mix shift Kevin described. Total gross margin was 45.5% in the second quarter of 2026 compared to 44.8% in the prior year period. Adjusted gross margin improved by 65 basis points to 45.6% compared to 44.9% in the prior year period due to cost improvements and lower warranty expenses. Expanding gross margin over time is critical to our overall profitability goals. particularly given the structural headwinds in the U.S. and we are pleased with the second quarter and first half expansion. Adjusted operating expenses for the second quarter of 2026 was $44.6 million, an increase of 1.2% compared to the prior year period. Adjusted R&D expense in the quarter was $4.9 million, an increase of 13.3% versus the prior year period as we are investing in clinical evidence generation and new product development that we believe will differentiate Inogen over the long term. Adjusted SG&A expense in the quarter was $39.8 million in line with prior year as investments to support new products and additions to our U.S. B2B sales channel were offset by cost reductions. Gap net loss for the second quarter of 2026 was $3.9 million compared to a net loss of $4.2 million in the prior year period. Adjusted net loss improved nearly 95% year-over-year to less than $0.1 million in the second quarter of 2026 compared with an adjusted net loss of $0.7 million in the prior year period. Adjusted EBITDA was $2.4 million in the second quarter of 2026 compared to $2.1 million in the prior year period and improvement of $300,000. U2's profitability was a strong quarter for us, and we continue to plan to drive operating leverage and efficiency while also prioritizing investments that support long-term growth. Moving to cash, we generated positive operating cash flow of $2.9 million in the second quarter of 2026 and free cash flow of $1 million. We ended the quarter with $106.8 million in cash, cash equivalents, markable securities, and restricted cash, with no debt outstanding. In the first half of 2026, we repurchased over 1.1 million shares of our common stock for a total consideration of $7.5 million. We continue to believe our stock is undervalued relative to the fundamentals and the strategic opportunity in front of us. We are well positioned to return capital to shareholders while investing in growth, and we intend to continue to do it thoughtfully. Now let me turn to our third quarter and full year 2026 outlook. We are updating our full year 2026 revenue guidance to a range of $355 million to $361 million, representing approximately 3% growth at the midpoint of the range. This represents a reduction from our previous guidance range of $366 million to $373 million. We continue to expect strong demand for our core POC products and further growth in the scaling of Aurora and Boxy. These factors will be partly offset by continued U.S. market channel mix shift pressure on our direct businesses and the timing of certain select distributor inventory purchases in international. For the third quarter of 2026, we expect reported revenue to be in line with the third quarter of 2025 reported revenue of $92.4 million. This reflects the impact of continued U.S. sales channel mix, as well as the impact of international distributor inventory purchases. As we manage through channel mix shifts on the top line while prioritizing growth investments, we are pleased to raise our full-year adjusted EBITDA guidance. We now expect adjusted EBITDA of approximately $4 million for the full year 2026, representing 48% growth over the $2.7 million reported for the full year 2025. With that, I will turn the call back to Kevin for closing remarks.

Thank you, Jason. I want to address the updated outlook we shared today. While our performance this quarter was in line with our expectations and we are lowering our guidance, We are approaching this period with a clear understanding of the market dynamics, a strong sense of accountability, and a focused plan to drive improvement. As we look ahead, our focus remains on execution. In the second quarter, we delivered continued international POC growth, realized strong US POC unit growth, and made meaningful progress in our U.S. B2B sales channel with new leadership and expanded sales team and positive traction for Boxy and Aurora. We have strengthened our leadership team with the addition of a chief operating officer while increasing our focus on financial discipline and operational execution reflected in the increased full-year adjusted EBITDA guidance. While we remain mindful of near-term headwinds, including international customer inventory management and ongoing channel mix pressure in our U.S. direct business, we are taking decisive action to improve execution, drive profitability, and create long-term shareholder value. Operator, please open the call for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then queue if you would like to remove your question from the question queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question comes from Mike Mattson from Needham & Co. Please proceed with your questions, Mike.

Yeah, thanks. So, you know, just wanted to ask one on this, you know, channel issue with the DTC side of things. So, I mean, is this the DTC business just sort of like a melting ice cube here that's going to just continue to fall? I mean, is there any ability to sell, you know, like the CPAP masks or other products through that channel that makes it worth kind of keeping it intact. I mean, I understand that while this makes shifts a negative for that part of the business, it's a positive for the B2B side. So I understand there's an offset, but I'm just trying to understand if there's any sort of bottom here, if this thing's going to just keep gradually eroding over time.

Hey, Mike, this is Kevin, and thanks for the question. And I think what It might be helpful here is if I kind of step back a little bit and then wrap that in here. So we have confidence that we do have the right strategy and many things are going well right now. The core POC business is healthy. The underlying demand is up 12%. International growth is 15%. Geo Expansion is contributing 80 basis points to the to the growth in the second quarter and the new products, Foxy and Aurora, are gaining traction and velocity. They contribute more than 100 basis points of growth. And if I look at this going forward, what is what's changed from where we were in the previous quarter? Well, one, and I'll start off with the the international, we did have a A few of our distributors have indicated that they're going to be managing inventory in the second half. We see that as transitory, right? This includes some factors like tenders getting delayed and distributor consolidation that is happening. But the international continues to grow. That is a highlight for us. We're confident, again, as I said, that this is transitory. Now this mix shift. that we talked about, it's been happening faster than we anticipated. And yes, you're right. That is a tailwind for the B2B. It's the headwind for the direct business. But we do see opportunities when we look at the DTC for that's to stabilize and that to grow. And when we're looking at the second half of this year, we're seeing that total U.S. business. And we bucket that together with the B2B U.S., We see us being able to overcome that headwind and see overall growth in the US business in the second half. Now the other piece of that headwind is the rental business. And the rental business is something that we have some additional factors that are in there. One is that shift that's happening with the HMEs providing the POCs first versus the oxygen tanks more frequently. But there's also some perspectives in there that we have to evaluate. We brought in some new folks that are taking a look at this for us, giving us a range of options to improve that business. And that's important for us going forward. But we do believe we have the right strategy. Yes, we believe we can sell more. We've been selling the Voxy through the DTC channel, and we do believe that we have opportunities to sell other products in there. That's core to us, and it's something that we're focused on. Jason, anything to add there?

I think you covered it. I mean, I think, like you said, we see a return to growth on the sales side in the second quarter for the US, which is really important. And I think we have work to do on rental. and we have a few options there to try to improve performance.

Okay, I understand. And just with regard to, I mean, it was good to see the gross margin, you know, up, especially given this mixed shift that, you know, into B2B from DTC, because I think that, you know, margins tend to be higher on the DTC side. So what I guess what's driving or what drove the gross margin improvement that you saw in the quarter? Jason, I'll let you take that one.

Yeah, I'll take this one. This is Jason. No, I think we're really happy with what we're seeing from a gross margin standpoint. You know, I think as you called out, we have the structural headwind from the next shift, but at the same time, we've been able to realize cost-saving initiatives. We did have We did have some modest one timers in the quarter. But if you look over time, you know, we've been able to even with this mixed shift kind of be in that 44 to 45% range. And the other thing I would highlight that's kind of helping us contribute here is we've been realizing lower warranty costs, which for us, quality of our product is a big differentiator for us in the market and particularly with our B2B partners. So I think that we expect to really be a to kind of offset some of that mixed shift going forward. As we look out, I would say we see that as stable. Mixed shift will continue to put pressure. We have some modest inflationary pressures, but we continue to have cost improvement initiatives. New products should be accretive. So like I said, we're happy with where we are from a gross margin standpoint.

Okay, thanks. And then I guess my last question is just on getting your POCs into the Chinese market. Can you just give us an update there with your partner?

Yeah, certainly, Mike. We're working through the regulatory process. We haven't guided any further on timing with that specific to the POCs. will provide updates as that becomes relevant. But one thing I will note also is we continue to make good progress, as noted in the prepared remarks with Semiox in the Chinese market. And we do continue to expect to have that regulatory clearance before the end of the year for Semiox in China.

Okay, great. Thanks.

Thank you. The next question comes from Anderson Chok from B Riley Securities. Please proceed with your questions, Anderson.

Hi, good afternoon. Thank you for taking the questions. So first, Aurora and VoxE5 continue to scale. Could you update us on where each stands today with contribution in the quarter, count of penetration, and how much contribution from these is embedded in the revised full-year range versus the original?

Yeah, maybe I'll start, Jason, and you can... Take over there. So with the we've been seeing the growth, the trajectory from that velocity I talked about both from a account basis with a doubling of the accounts on a quarter on quarter basis. And we anticipate being able to see that continue to grow. Now, remember that Aurora, the masks, those are You're picking those up, even though it's account by account, it's also patient by patient in this. We like what we've seen. We have good feedback coming from the patients, as well as the HCPs, and similarly with Voxy. Voxy is, again, good, solid feedback that we're hearing in the market. We like the volume that we have. We like the discussions that are continuing on here going forward. We haven't really broken it down any further than that. Jason, anything you want to?

Yeah, I mean, I think So to answer the questions like the contribution here, in the second quarter, it contributed, new products contributed a little over 100 base points, specifically the Voxy and Aurora. And as we think about the second half, we expect that to accelerate. And I think, I think importantly, as we even, as you think about the guide to guide here, we have, I would tell you that that assumption is unchanged. You know, I think that this is on target to what we were, we were forecasting.

Okay, got it. Thank you. And then on semi ox, I guess outside of China, could you provide an update on the impact 200 study and a timeline there from data to a US coverage decision?

Yeah, so we're, you know, we, again, with that one, we were progressing well, we're where we expected to be from an enrollment standpoint. That is, you know, we're happy with that. We haven't guided to the timing on that, Sanderson. We'll give that update once we get to the last patient and the last visit. We will do something similar as we did with the scope study in China. but remember also we do have uh we'll need a second trial for that that we're working through with the uh with the the investigators on simiox because we'll want to have at least two good trials to take to CMS and make sure that we put our best foot forward you've got really one shot on goal with that okay got it thank you for taking the questions thank you the next question comes from Ilya Zubkov from Freedom Capital Markets please proceed with your questions

Thank you for taking my question. So I have just a quick one. As you continue to evolve the mix toward the B2B channel, could you share your perspective on patient and provider stickness and how transition between different channels typically play out in terms of patient retention?

Certainly. So when we think about the channels and Patience Stickiness. Part of our strategy is to really own three buckets as we look at this, owning the patient and the engagement with the patients, the HCPs, and as well as the HME relationships, the B2B. When you look at the quote study that we have put out, that demonstrates that level of engagement that we're working towards One with the HCP because the HCP is going to make the recommendations to the patients. We want them to have the brand preference and loyalty and insist on the antigen. We're working towards the evidence to be able to allow us to continue that engagement and drive preference. Same thing with the patients. With the patients, if this quote study that we have in the questionnaire is a patient and a caregiver, and HCP Engagement Forum. And that enables us to continue to build that brand preference with Inogen as we start to control some of those conversations or I should more say heavily influence those conversations. Then we also, when we look at the B2B partner, we're not necessarily giving up the control to the B2B partner. A long range part of our strategy that we've been building towards is our digital health. And the digital health connectivity again allows us to engage with the patients, to healthcare partners and provide that connection back to the B2B partners. So it's this broader ecosystem and we're driving all angles to that.

Great. Thank you very much.

Thank you. There are no further questions. And at this time, I'd like to hand the call back to CEO Kevin Smith for closing remarks. Thank you, Kevin. Over to you.

Thank you. So at the midpoint of 2026, our path forward is increasingly clear. Our commercial strategy is gaining traction, our product and clinical pipeline are advancing, and the new additions to our executive team positions us well for the future. This progress would not be possible without the hard work, dedication, and resilience of our employees who drive Inogen forward every day. Thank you for your continued support. We look forward to updating you on our progress next quarter.

Thank you, ladies and gentlemen, this concludes today's call. Thank you for joining us.