Inogen Tops Q1 Earnings & Revenues, FY15 Guidance Upheld - Analyst Blog

Inogen IncINGN reported first-quarter 2015 adjusted earnings of 8 cents per share, which beat the Zacks Consensus Estimate by a penny and surged 52.8% from the year-ago quarter. Shares rallied almost 2% (77 cents) to close at $37.49 following the announcement.

Revenues

Revenues surged 42.8% year over year to $33.8 million, which was better than the Zacks Consensus Estimate of $30 million. The upside was primarily driven by 70.7% higher business-to-business domestic sales, while business-to-business International sales shot up almost 89%.

The strong international performance hints at the growing traction of Inogen's products and insurance reimbursement for Inogen One G3 portable oxygen concentrator in Germany and France. During the quarter, the company hired its first international sales representative.

Direct-to-consumer domestic sales increased roughly 26% to $8.8 million. Meanwhile, direct-to-consumer rental sales climbed 22% to $10.7 million.

Unit sales in the quarter surged 74.6% year over year to 11K. Net rental patients at the end of the year were 30K.

Operating Performance

In the quarter under review, gross margin contracted 300 basis points (bps) on a year-over-year basis to 47.5%. The downside can be largely attributed to unfavorable product mix toward business-to-business accounts which have a lower average selling price and price concessions.

Earnings before Interest, Tax, Depreciation and Amortization (EBITDA), as a percentage of revenues, increased 50 bps on a year-over-year basis to 18.9% in the quarter.

Operating expenses, as a percentage of revenues, decreased 390 bps on a year-over-year basis to 40%. This decline can be attributed to lower research & development, selling & marketing and general & administrative expenses, which declined 10 bps, 360 bps and 20 bps, respectively.

As a result, operating margin expanded 90 bps on a year-over-year basis to 7.5%.

Balance Sheet

As of Mar 31, 2015, cash and cash equivalents increased to $61.1 million from $56.8 million as of Dec 31, 2014. Total debt was $0.2 million as of Mar 31, 2015.

Guidance

Inogen reiterated its 2015 revenue guidance at the $133-$137 million range, which represents year-over-year growth of 17.9% to 39.2%. Direct-to-consumer sales are expected to be around 30%, rental approximately 20% and domestic business-to-business about 30%.

Management expects the upgraded Inogen One G3 to be available toward the end of 2015. Inogen continues to expect net positive cash flow for 2015 with no additional equity capital required to meet its current plan.

Our Take

Inogen's unique direct-to-customer business model, innovative product portfolio and growing patient base will drive significant top-line growth in the long run. Increasing international sales and expansions also bode well.

However, foreign exchange volatility, pricing pressure and unfavorable product mix will remain overhangs.

Stocks to Consider

Inogen carries a Zacks Rank #2 (Buy). Other favorably-ranked stocks in the industry include RTI Surgical RTIX , LDR Holding LDRH and Merit Medical MMSI . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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