ingn-10q_20190630.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

Commission file number: 001-36309

INOGEN, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0989359
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
326 Bollay Drive Goleta, CA	93117
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (805) 562-0500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

INGN

The NASDAQ Stock Market LLC

(NASDAQ Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2019, the registrant had 21,933,758 shares of common stock, par value $0.001, outstanding.

TABLE OF CONTENTS

	Part I – Financial Information	Page
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018	3
	Consolidated Statements of Comprehensive Income (unaudited) for the Three and Six Months Ended June 30, 2019 and June 30, 2018	5
	Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Six Months Ended June 30, 2019 and June 30, 2018	6
	Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2019 and June 30, 2018	7
	Condensed Notes to the Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	55
Item 4.	Controls and Procedures	56
	Part II – Other Information
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89
Item 3.	Defaults Upon Senior Securities	89
Item 4.	Mine Safety Disclosures	89
Item 5.	Other Information	89
Item 6.	Exhibits	90
SIGNATURES		91

INOGEN, INC.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Inogen, Inc.

Consolidated Balance Sheets

(amounts in thousands)

	June 30,			December 31,
	2019			2018
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	213,947		$	196,634
Marketable securities		42,202			43,715
Accounts receivable, net		46,721			37,041
Inventories, net		24,485			27,071
Deferred cost of revenue		352			359
Income tax receivable		2,750			2,655
Prepaid expenses and other current assets		10,269			7,108
Total current assets		340,726			314,583
Property and equipment
Rental equipment, net		40,587			43,038
Manufacturing equipment and tooling		9,034			7,338
Computer equipment and software		6,943			6,153
Furniture and equipment		1,463			1,445
Leasehold improvements		3,595			3,407
Land and building		125			125
Construction in process		2,616			3,128
Total property and equipment		64,363			64,634
Less accumulated depreciation		(43,002	)		(42,293	)
Property and equipment, net		21,361			22,341
Goodwill		2,242			2,257
Intangible assets, net		3,127			3,755
Operating lease right-of-use asset		5,461			—
Deferred tax asset - noncurrent		26,063			30,130
Other assets		4,793			2,832
Total assets	$	403,773		$	375,898

See accompanying condensed notes to the consolidated financial statements.

Inogen, Inc.

Consolidated Balance Sheets (continued)

(amounts in thousands, except share and per share amounts)

	June 30,		December 31,
	2019		2018
	(unaudited)
Liabilities and stockholders' equity
Current liabilities
Accounts payable and accrued expenses	$	27,325	$	26,786
Accrued payroll		6,969		11,407
Warranty reserve - current		4,036		3,549
Operating lease liability - current		2,006		—
Deferred revenue - current		5,616		4,451
Income tax payable		410		392
Total current liabilities		46,362		46,585
Long-term liabilities
Warranty reserve - noncurrent		6,289		5,981
Operating lease liability - noncurrent		4,456		—
Deferred revenue - noncurrent		12,638		11,844
Deferred tax liability - noncurrent		230		232
Other noncurrent liabilities		—		832
Total liabilities		69,975		65,474
Commitments and contingencies (Note 9)
Stockholders' equity
Common stock, $0.001 par value per share; 200,000,000 authorized; 21,933,669 and 21,778,632 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively		22		22
Additional paid-in capital		257,177		249,194
Retained earnings		75,946		60,484
Accumulated other comprehensive income		653		724
Total stockholders' equity		333,798		310,424
Total liabilities and stockholders' equity	$	403,773	$	375,898

See accompanying condensed notes to the consolidated financial statements.

Inogen, Inc.

Consolidated Statements of Comprehensive Income

(unaudited)

(amounts in thousands, except share and per share amounts)

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Revenue
Sales revenue	$	95,863		$	91,987		$	180,681		$	165,571
Rental revenue		5,200			5,251			10,584			10,718
Total revenue		101,063			97,238			191,265			176,289
Cost of revenue
Cost of sales revenue		47,230			44,968			89,297			81,916
Cost of rental revenue, including depreciation of $1,594 and $1,966, for the three months ended and $3,299 and $4,131 for the six months ended, respectively		3,618			3,800			7,344			8,176
Total cost of revenue		50,848			48,768			96,641			90,092
Gross profit
Gross profit-sales revenue		48,633			47,019			91,384			83,655
Gross profit-rental revenue		1,582			1,451			3,240			2,542
Total gross profit		50,215			48,470			94,624			86,197
Operating expense
Research and development		1,468			1,775			3,137			3,191
Sales and marketing		27,758			22,999			55,959			41,037
General and administrative		8,844			9,675			18,525			19,248
Total operating expense		38,070			34,449			77,621			63,476
Income from operations		12,145			14,021			17,003			22,721
Other income (expense)
Interest income		1,394			673			2,728			1,216
Other income (expense)		145			(1,048	)		25			(604	)
Total other income (expense), net		1,539			(375	)		2,753			612
Income before provision (benefit) for income taxes		13,684			13,646			19,756			23,333
Provision (benefit) for income taxes		3,524			(964	)		4,294			(2,035	)
Net income		10,160			14,610			15,462			25,368
Other comprehensive income (loss), net of tax
Change in foreign currency translation adjustment		106			76			(31	)		184
Change in net unrealized gains (losses) on foreign currency hedging		(618	)		723			(534	)		474
Less: reclassification adjustment for net (gains) losses included in net income		282			(103	)		458			69
Total net change in unrealized gains (losses) on foreign currency hedging		(336	)		620			(76	)		543
Change in net unrealized gains (losses) on marketable securities		23			19			36			—
Total other comprehensive income, net of tax		(207	)		715			(71	)		727
Comprehensive income	$	9,953		$	15,325		$	15,391		$	26,095

Basic net income per share attributable to common stockholders (Note 6)	$	0.47		$	0.69		$	0.71		$	1.20
Diluted net income per share attributable to common stockholders (Note 6)	$	0.45		$	0.65		$	0.69		$	1.13
Weighted-average number of shares used in calculating net income per share attributable to common stockholders:
Basic common shares		21,815,634			21,172,170			21,783,150			21,099,566
Diluted common shares		22,359,679			22,503,749			22,459,101			22,409,011

See accompanying condensed notes to the consolidated financial statements.

Inogen, Inc.

Consolidated Statements of Stockholders’ Equity

(amounts in thousands, except share amounts)

	Three months ended June 30, 2019 and June 30, 2018
											Accumulated
						Additional					other			Total
	Common stock					paid-in			Retained		comprehensive			stockholders'
	Shares			Amount		capital			earnings		income			equity
Balance, March 31, 2018 (unaudited)		21,214,662		$	21	$	226,635		$	19,397	$	284		$	246,337
Stock-based compensation		—			—		3,186			—		—			3,186
Vesting of restricted stock units		459			—		—			—		—			—
Stock options exercised		106,422			—		2,058			—		—			2,058
Net income		—			—		—			14,610		—			14,610
Other comprehensive income		—			—		—			—		715			715
Balance, June 30, 2018 (unaudited)		21,321,543		$	21	$	231,879		$	34,007	$	999		$	266,906

Balance, March 31, 2019 (unaudited)		21,931,342		$	22	$	255,226		$	65,786	$	860		$	321,894
Stock-based compensation		—			—		1,779			—		—			1,779
Employee stock purchases		—			—		—			—		—			—
Restricted stock awards issued, net of forfeitures		(12,342	)		—		—			—		—			—
Vesting of restricted stock units		10,111			—		(8	)		—		—			(8	)
Shares withheld related to net restricted stock settlement		(978	)		—		(63	)		—		—			(63	)
Stock options exercised		5,536			—		243			—		—			243
Net income		—			—		—			10,160		—			10,160
Other comprehensive income		—			—		—			—		(207	)		(207	)
Balance, June 30, 2019 (unaudited)		21,933,669		$	22	$	257,177		$	75,946	$	653		$	333,798

	Six months ended June 30, 2019 and June 30, 2018
											Accumulated
						Additional					other			Total
	Common stock					paid-in			Retained		comprehensive			stockholders'
	Shares			Amount		capital			earnings		income			equity
Balance, December 31, 2017		20,976,350		$	21	$	218,109		$	8,639	$	272		$	227,041
Stock-based compensation		—			—		6,567			—		—			6,567
Employee stock purchases		12,013			—		988			—		—			988
Restricted stock awards issued		53,052			—		—			—		—			—
Vesting of restricted stock units		6,665			—		—			—		—			—
Shares withheld related to net restricted stock settlement		(2,553	)		—		(302	)		—		—			(302	)
Stock options exercised		276,016			—		6,517			—		—			6,517
Net income