Inogen(US:INGN)2022-02-24 21:11Part I Business Inogen is a medical technology company specializing in portable oxygen concentrators with a direct-to-consumer sales model - Inogen is a medical technology company specializing in portable oxygen concentrators (POCs) for patients with chronic respiratory conditions, utilizing a direct-to-consumer marketing and rental strategy2021 - International sales constituted approximately 22.2% of total revenue in 2021, with products sold in 59 countries outside the United States through distributors, resellers, and home medical equipment providers50 - Medicare reimbursement is a significant revenue source, accounting for 81.9% of rental revenue in 20215659 - The company has 66 issued patents and 27 pending patent applications as of December 31, 2021, covering system designs, operating features, and the TAV (Tidal Assist Ventilator) technology81118 - As of December 31, 2021, Inogen had 1,021 full and part-time employees worldwide, with the largest group (517) in sales, marketing, clinical, and client services126 Key Product Specifications | | Inogen One G5 | Inogen One G4 | | :--- | :--- | :--- | | Capacity (ml/min) | 1,260 | 630 | | Weight (lbs) | 4.7 (single battery) | 2.8 (single battery) | | Battery run-time | Up to 6.5 hours (single) | Up to 2.6 hours (single) | | | Up to 13 hours (double) | Up to 5 hours (double) | | Sound | 38 dBA | 40 dBA | 2021 U.S. Revenue Breakdown | Channel | Percentage of U.S. Revenue | | :--- | :--- | | Direct-to-consumer sales | 50.6% | | Business-to-business sales | 32.8% | | Direct-to-consumer rentals | 16.6% | Risk Factors The company faces significant risks from competition, supply chain vulnerabilities, and reliance on Medicare reimbursement - The company faces intense competition from large, well-capitalized competitors like Respironics (Philips) and Invacare, who have greater resources for R&D, marketing, and sales153155 - A significant portion of sales revenue comes from a limited number of customers; in 2021, the top 10 customers accounted for approximately 27.4% of total revenue156 - The company relies on single-source suppliers for critical components; shortages of semiconductor chips led to a temporary manufacturing suspension from January to early February 2022158159160 - The business is heavily dependent on Medicare reimbursement, which accounted for approximately 81.9% of rental revenue in 2021171180 - The company is subject to extensive regulation, and failure to obtain certification under the new European Medical Device Regulation (MDR) could prevent sales in the EU after May 2024263282 - The company is exposed to cybersecurity risks and experienced a data security incident in 2018, potentially exposing the personal information of approximately 30,000 rental customers235236 Unresolved Staff Comments The company reports no unresolved comments from the Securities and Exchange Commission - None343 Properties The company's principal facilities, including its headquarters and manufacturing sites, are leased Key Leased Facilities | Location | Size (sq. ft.) | Use | Lease Expiration | | :--- | :--- | :--- | :--- | | Goleta, CA | ~51,000 | Corporate HQ, Mfg. & Office | March 2030 | | Plano, TX | ~154,000 | Mfg. & Office | April 2031 | | Cleveland, OH | ~94,000 | Office | September 2024 | Legal Proceedings A securities class action and related shareholder lawsuits filed in 2019 were dismissed in 2021 - A securities class action lawsuit (In re Inogen, Inc. Sec. Litig.) was filed in March 2019, alleging violations of the Securities Exchange Act; the action was dismissed in its entirety in September 2021345 - Several shareholder derivative lawsuits filed in 2019 with similar allegations were voluntarily dismissed by the plaintiffs346347 Mine Safety Disclosures This section is not applicable to the company's operations - None349 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock trades on NASDAQ under "INGN" and it does not anticipate paying cash dividends - The company's common stock has been publicly traded on the NASDAQ Global Select Market under the symbol "INGN" since February 14, 2014352 - The company has never declared or paid cash dividends and does not intend to in the foreseeable future, planning to retain earnings to fund business operations and growth360 [Reserved] This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue grew 16.1% in 2021, driven by rental revenue, but the company reported a net loss due to higher expenses and taxes - The COVID-19 pandemic has adversely impacted results, causing lower direct-to-consumer sales but also surges in business-to-business demand and significant supply chain disruptions369371374 - Total gross margin increased to 49.3% in 2021 from 44.8% in 2020, driven by higher average selling prices and reimbursement rates430432433 - Operating expenses increased in 2021, with R&D up 17.7% to $16.6 million and Sales & Marketing up 15.7% to $112.8 million434436437 - The company ended 2021 with $235.5 million in cash and cash equivalents and $10.0 million in marketable securities445449 Revenue by Category (2021 vs. 2020) | Revenue Category | 2021 (in thousands) | 2020 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sales Revenue | $311,730 | $280,189 | $31,541 | 11.3% | | Rental Revenue | $46,273 | $28,298 | $17,975 | 63.5% | | Total Revenue | $358,003 | $308,487 | $49,516 | 16.1% | Revenue by Channel and Geography (2021 vs. 2020) | Channel/Geography | 2021 (in thousands) | 2020 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Business-to-business domestic | $91,371 | $96,423 | -5.2% | | Business-to-business international | $79,460 | $62,147 | 27.9% | | Direct-to-consumer domestic sales | $140,899 | $121,619 | 15.9% | | Direct-to-consumer domestic rentals | $46,273 | $28,298 | 63.5% | Key Financial Results (2021 vs. 2020) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $358,003 | $308,487 | | Gross Profit | $176,483 | $138,180 | | Net Loss | $(6,333) | $(5,829) | | Adjusted EBITDA | $29,505 | $21,648 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are foreign currency exchange from Euro-denominated sales and minimal interest rate risk - The principal market risk is foreign currency exchange risk, as the majority of European sales are denominated in Euros while most revenue is in U.S. dollars499 - The company uses foreign exchange forward contracts to hedge forecasted Euro-denominated revenue to reduce the volatility of cash flows500 - Interest rate risk is considered low, and a hypothetical 100 basis point change in interest rates would not have a material impact on its financial position502 Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements for the fiscal year ended December 31, 2021 - This item includes the full set of audited consolidated financial statements and supplementary data as required, which are filed as part of the report503538 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None504 Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective as of year-end 2021 - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2021505 - There were no changes in internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls506 - The independent registered public accounting firm, Deloitte & Touche LLP, audited the internal control over financial reporting and concluded that the company maintained, in all material respects, effective internal control as of December 31, 2021509512 Other Information The company announced its 2022 annual meeting and a decision not to increase shares under its equity incentive plans - The 2022 annual meeting of stockholders is scheduled for June 8, 2022519 - The board of directors opted not to exercise the "evergreen" provisions to increase the share reserves for the 2014 Equity Incentive Plan and the 2014 Employee Stock Purchase Plan in 2022520 Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - Not applicable521 Part III Directors, Executive Officers and Corporate Governance Information is incorporated by reference from the company's definitive Proxy Statement for the 2022 Annual Meeting - The required information is incorporated by reference from the company's upcoming Proxy Statement524 Executive Compensation Information regarding executive compensation is incorporated by reference from the company's Proxy Statement - The required information is incorporated by reference from the company's upcoming Proxy Statement526 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership is incorporated by reference from the company's Proxy Statement - The required information is incorporated by reference from the company's upcoming Proxy Statement527 Certain Relationships and Related Transactions, and Director Independence Information regarding related transactions and director independence is incorporated by reference from the Proxy Statement - The required information is incorporated by reference from the company's upcoming Proxy Statement528 Principal Accountant Fees and Services Information regarding accountant fees and services is incorporated by reference from the company's Proxy Statement - The required information is incorporated by reference from the company's upcoming Proxy Statement529 Part IV Exhibits, Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K - This item lists all documents filed as part of the Annual Report, including financial statements and exhibits532 Form 10-K Summary This item is not applicable - Not applicable535 Financial Statements Consolidated Balance Sheets Total assets grew to $489.5 million in 2021, driven by an increase in cash and cash equivalents Consolidated Balance Sheet Highlights (as of Dec 31) | (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $235,524 | $211,962 | | Accounts receivable, net | $24,452 | $29,717 | | Inventories, net | $31,873 | $24,815 | | Total current assets | $329,186 | $305,697 | | Property and equipment, net | $38,926 | $28,230 | | Goodwill | $32,979 | $33,165 | | Total Assets | $489,513 | $461,852 | | Liabilities & Equity | | | | Total current liabilities | $61,512 | $56,710 | | Total liabilities | $119,286 | $112,229 | | Total stockholders' equity | $370,227 | $349,623 | | Total Liabilities & Equity | $489,513 | $461,852 | Consolidated Statements of Comprehensive Income (Loss) The company's net loss increased to $(6.3) million in 2021 despite a 16.1% rise in total revenue Consolidated Income Statement Summary (Year Ended Dec 31) | (in thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total Revenue | $358,003 | $308,487 | $361,943 | | Total cost of revenue | $181,520 | $170,307 | $190,082 | | Total Gross Profit | $176,483 | $138,180 | $171,861 | | Total operating expense | $167,243 | $150,205 | $152,072 | | Income (loss) from operations | $9,240 | $(12,025) | $19,789 | | Provision for income taxes | $14,992 | $549 | $3,322 | | Net income (loss) | $(6,333) | $(5,829) | $20,950 | | Diluted EPS | $(0.28) | $(0.27) | $0.94 | Consolidated Statements of Cash Flows Net cash from operating activities was $23.6 million, and the company's cash balance increased to $235.5 million Summary of Consolidated Cash Flows (Year Ended Dec 31) | (in thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $23,633 | $37,013 | $40,593 | | Net cash used in investing activities | $(14,645) | $(25,640) | $(44,057) | | Net cash provided by financing activities | $15,000 | $2,066 | $4,929 | | Net increase in cash and cash equivalents | $23,562 | $13,925 | $1,403 | | Cash and cash equivalents, end of period | $235,524 | $211,962 | $198,037 |