Inogen (INGN) Beats Earnings and Revenue Estimates in Q4

Inogen, Inc. INGN reported adjusted fourth-quarter earnings of 31 cents per share, outpacing the Zacks Consensus Estimate by 47.6%. Earnings increased 24% on a year-over-year basis.

Total revenues in the reported quarter rose 25.4% to $63.8 million on a year-over-year basis. The figure beat the Zacks Consensus Estimate by 2.9%.

Per management, the promising results were largely driven by record sales in the company’s domestic direct-to-consumer channel and in the domestic business-to-business channel.

In the fourth quarter, total units sold were 34,000, up 45.9% year over year.

Moreover, in the past six months, Inogen has outperformed the industry in terms of price. The stock has returned 39.1% compared with the industry’s rally of 15.3%.

Segmental Analysis

Sales Revenues in the fourth quarter totaled $58.4 million, reflecting year-over-year increase of 37%.

Rental Revenues declined 34% to $5.4 million on year-over-year basis.
In the quarter under review, Business-to-business sales (domestic and international) rose 25% to $33.8 million.

Direct-to-consumer sales (domestic and international) increased 23.9% to $29.5 million on a year-over-year basis.

Inogen, Inc Price, Consensus and EPS Surprise

 

Inogen, Inc Price, Consensus and EPS Surprise | Inogen, Inc Quote

Margins

For the fourth quarter, gross margin was 48.2%, down 30 basis points (bps) on a year-over-year basis. The decline was primarily due to the $2-million Cures Act benefit recorded in the fourth quarter of 2016.

However, operating expenses rose to $25.6 million, reflecting an increase of 38% on year-over-year basis, owing to a $1.4-million increase in research and development expenditures. This was further propelled by a 39.9% increase in sales, general and administrative spending.

Furthermore, adjusted EBITDA rose 5.8% to $11.6 million from the year-ago quarter.

Financial Position

Inogen exited the fourth quarter with cash, cash equivalents and marketable securities of $173.9 million, compared with $163.1 million in the year-ago quarter.

FY17 at a Glance

For full-year 2017, revenues totaled $292.4 million, up 23% from 2016 level. Sales revenues of $255.5 million grew 34.1% from 2016. However, rental revenues were down 30.9% to $23.9 million from 2016.

Business-to-business sales (domestic and international) increased 30% to $138.9 million on year-over-year basis. Moreover, direct-to-consumer sales (domestic and international) increased 15% to $110.5 million on year-over-year basis.

The year also saw adjusted EBITDA of $50.8 million, representing a 17.2% increase from 2016.

Number of units sold in 2017 are 128,000, reflecting an increase of 39.1% from 2016.

By the end of 2017, direct-to-consumer sales representatives totaled 263, indicating an increase of 48.6% from 2016.

Guidance

Inogen raised its full-year 2018 revenue guidance to $298-$308 million, up from $295-$305 million guided earlier. The figure is also above the Zacks Consensus Estimate of $297.74 million. However, rental revenues are expected to be relatively flat in 2018 compared to 2017.

Guidance for full-year 2018 adjusted EBITDA is $60-$64 million, representing 18.0% to 25.9% growth from 2017 results.

Additionally, the company expects net positive cash flow for 2018 with no additional equity capital required to meet its current operating plan.

Our Take

Inogen ended the fourth quarter of 2017 on a positive note, with earnings and revenues beating the Zacks Consensus Estimate. Strong sales revenues drove earnings in the quarter. Moreover, promising business-to-business and direct-to-consumer sales growth is encouraging. The company expects direct-to-consumer sales to be its fastest growing channel, domestic business-to-business sales to have a solid growth rate. Inogen will continue to focus on the European markets. A raised revenue guidance for 2018 and a strong balance sheet position also instill confidence.

On the flip side, declining rental revenues is a concern. Moreover, the international business-to-business sales in the fourth quarter declined on year-over-year basis. Adding to the woes, the company saw diminishing gross margin in the quarter and a rise in operating expenses, driven by gradually increasing research and development spending. Stiff competition in the niche space is likely to mar prospects.

Zacks Rank & Other Key Picks

Inogen sports a Zacks Rank #1 (Strong Buy).

A few other top-ranked stocks that reported solid results this earnings season are athenahealth Inc. ATHN, PetMed Express, Inc. PETS and Centene Corporation CNC. Each of these stocks sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

athenahealth reported adjusted earnings per share of $1.11 in the fourth quarter of 2017, up a whopping 79% on a year-over-year basis. Revenues increased 14.2% to $329 million.

PetMed recently reported third-quarter fiscal 2018 results. Adjusted earnings per share were 44 cents, up 88.3% from the prior-year quarter. Revenues rose 13.7% to $60.1 million.

Centene reported fourth-quarter 2017 adjusted net income per share of 97 cents, which beat the Zacks Consensus Estimate by 3.2%. Also, total revenues grew 8% to $12.8 billion from the year-ago quarter.

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