Inogen, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Summary of Significant Accounting Policies (Tables)

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2018

Sales Revenue Disaggregated by Sales Channel and Geographic Region

The following table sets forth the Company’s sales revenue disaggregated by sales channel and geographic region:

(amounts in thousands)	Years ended December 31,
Revenue by region and category	2018		2017		2016
Business-to-business domestic sales	$	116,581	$	83,390	$	56,605
Business-to-business international sales		77,333		55,519		50,106
Direct-to-consumer domestic sales		142,101		86,583		61,459
Total sales revenue	$	336,015	$	225,492	$	168,170

Summary of Fair Value Assets Measured on Recurring Basis for Cash, Cash Equivalents and Marketable Securities

The following table summarizes fair value measurements by level for the assets measured at fair value on a recurring basis for cash, cash equivalents and marketable securities:

	As of December 31, 2018
			Gross					Cash
	Adjusted		unrealized					and cash		Marketable
(amounts in thousands)	cost		gains (losses)			Fair value		equivalents		securities
Cash	$	33,671	$	—		$	33,671	$	33,671	$	—
Level 1:
Money market accounts		158,438		—			158,438		158,438		—

Level 2:
Corporate bonds		13,629		(16	)		13,613		—		13,613
U.S. Treasury securities		34,620		7			34,627		4,525		30,102
Total	$	240,358	$	(9	)	$	240,349	$	196,634	$	43,715

	As of December 31, 2017
			Gross					Cash
	Adjusted		unrealized					and cash		Marketable
(amounts in thousands)	cost		losses			Fair value		equivalents		securities
Cash	$	46,237	$	—		$	46,237	$	46,237	$	—
Level 1:
Money market accounts		93,430		—			93,430		93,430		—

Level 2:
Certificates of deposit		11,010		(4	)		11,006		490		10,516
Corporate bonds		20,789		(21	)		20,768		2,796		17,972
Agency mortgage-backed securities		2,005		(1	)		2,004		—		2,004
U.S. Treasury securities		499		—			499		—		499
Total	$	173,970	$	(26	)	$	173,944	$	142,953	$	30,991

Summary of Estimated Fair Value of Company's Investments in Marketable Securities Classified by Contractual Maturity Date

The following table summarizes the estimated fair value of the Company’s investments in marketable securities, classified by the contractual maturity date of the securities:

	December 31,
(amounts in thousands)	2018
Due within one year	$	43,715
Due in one year through five years		—
Total	$	43,715

Summary of Components of Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) were as follows:

	As of December 31, 2018
	Foreign		Unrealized			Unrealized			Accumulated
	currency		gains (losses) on			gains (losses)			other
	translation		marketable			on cash			comprehensive
(amounts in thousands)	adjustments		securities			flow hedges			income
Balance as of December 31, 2017	$	363	$	(17	)	$	(74	)	$	272
Other comprehensive gain		31		17			404			452
Balance as of December 31, 2018	$	394	$	—		$	330		$	724

	As of December 31, 2017
	Foreign		Unrealized			Unrealized			Accumulated
	currency		gains (losses) on			gains (losses)			other
	translation		marketable			on cash			comprehensive
(amounts in thousands)	adjustments		securities			flow hedges			income (loss)
Balance as of December 31, 2016	$	—	$	(82	)	$	47		$	(35	)
Other comprehensive gain (loss)		363		65			(121	)		307
Balance as of December 31, 2017	$	363	$	(17	)	$	(74	)	$	272

Summary of Cash, Cash Equivalents and Short-term Investments

. Cash, cash equivalents, and marketable securities consist of the following:

(amounts in thousands)	December 31,
Cash and cash equivalents	2018		2017
Cash	$	33,671	$	46,237
Money market accounts		158,438		93,430
Certificates of deposit		—		490
Corporate bonds		—		2,796
U.S. Treasury securities		4,525		—
Total cash and cash equivalents	$	196,634	$	142,953
Marketable securities
Certificates of deposit	$	—	$	10,516
Corporate bonds		13,613		17,972
Agency mortgage-backed securities		—		2,004
U. S. Treasury securities		30,102		499
Total marketable securities	$	43,715	$	30,991

Schedule of Gross Accounts Receivable Balance Concentrations by Major Category

Gross accounts receivable balance concentrations by major category as of December 31, 2018 and December 31, 2017 were as follows:

	As of					As of
(amounts in thousands)	December 31, 2018					December 31, 2017
Gross accounts receivable	$		%			$		%
Rental ⁽¹⁾	$	3,406		8.7	%	$	6,236		18.0	%
Business-to-business and other receivables⁽²⁾		35,656		91.3	%		28,474		82.0	%
Total gross accounts receivable	$	39,062		100.0	%	$	34,710		100.0	%

Schedule of Net Accounts Receivable Balance Concentrations by Major Category

Net accounts receivable (gross accounts receivable, net of allowances) balance concentrations by major category as of December 31, 2018 and December 31, 2017 were as follows:

	As of					As of
(amounts in thousands)	December 31, 2018					December 31, 2017
Net accounts receivable	$		%			$		%
Rental ⁽¹⁾	$	2,413		6.5	%	$	4,212		13.4	%
Business-to-business and other receivables ⁽²⁾		34,628		93.5	%		27,232		86.6	%
Total net accounts receivable	$	37,041		100.0	%	$	31,444		100.0	%

(1)	Rental includes Medicare, Medicaid/other government, private insurance and patient pay.

(2)

Business-to business receivables included one customer with a gross accounts receivable balance of $16,198 and $10,394 as of December 31, 2018 and December 31, 2017, respectively. This customer received extended payment terms through a direct financing plan offered. The Company also has a credit insurance policy in place, which allocated up to $18,000 in coverage as of December 31, 2018 and allocated up to $12,000 in coverage as of December 31, 2017 for this customer with a $400 deductible and 10% retention.

Schedule of Percentage Breakdown of Net Accounts Receivable by Aging Category by Invoice Due Date

The following table sets forth the percentage breakdown of the Company’s net accounts receivable (gross accounts receivable net of allowances) by aging category by invoice due date as of December 31, 2018 and December 31, 2017.

	As of					As of
(amounts in thousands)	December 31, 2018					December 31, 2017
Net accounts receivable by aging category	$		%			$		%
Held and Unbilled	$	80		0.2	%	$	537		1.7	%
Aged 0-90 days		36,245		97.9	%		29,237		93.0	%
Aged 91-180 days		425		1.1	%		435		1.4	%
Aged 181-365 days		234		0.6	%		602		1.9	%
Aged over 365 days		57		0.2	%		633		2.0	%
Total net accounts receivable	$	37,041		100.0	%	$	31,444		100.0	%

Schedule of Allowances for Accounts Receivable

The following table sets forth the accounts receivable allowances as of December 31, 2018 and December 31, 2017:

	As of					As of
(amounts in thousands)	December 31, 2018					December 31, 2017
Allowances - accounts receivable	$		%			$		%
Doubtful accounts	$	693		1.8	%	$	1,415		4.1	%
Rental revenue adjustments		438		1.1	%		947		2.7	%
Sales returns		890		2.3	%		904		2.6	%
Total allowances - accounts receivable	$	2,021		5.2	%	$	3,266		9.4	%

Breakdown of Company's Revenue from U.S. and Non-U.S. Sources

A portion of revenue is earned from sales outside the United States. Approximately 74.8% of the non-U.S. revenue for the year ended December 31, 2018 was invoiced in Euros. A breakdown of the Company’s revenue from U.S. and non-U.S. sources for the years ended December 31, 2018, 2017 and 2016 is as follows:

	Years ended December 31,
(amounts in thousands)	2018		2017		2016
U.S. revenue	$	280,778	$	193,919	$	152,723
Non-U.S. revenue		77,333		55,519		50,106
Total revenue	$	358,111	$	249,438	$	202,829

Schedule of Inventories

Inventories that are considered current consist of the following:

	December 31,
(amounts in thousands)	2018			2017
Raw materials and work-in-progress	$	24,980		$	16,324
Finished goods		2,756			2,917
Less: reserves		(665	)		(399	)
Inventories	$	27,071		$	18,842

Computation of Depreciation and Amortization using Straight Line Method Over Estimated Useful Lives of Assets

Property and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line method over the assets’ estimated useful lives as follows:

Rental equipment	1.5-5 years
Manufacturing equipment and tooling	3-5 years
Computer equipment and software	2-3 years
Furniture and equipment	3-5 years
Leasehold improvements	Lesser of estimated useful life or remaining lease term

Summary of Depreciation and Amortization Expense of Rental Equipment and Other Property and Equipment

Depreciation and amortization expense related to rental equipment and other property and equipment are summarized below for the years ended December 31, 2018, 2017 and 2016, respectively.

	Years ended December 31,
(amounts in thousands)	2018		2017		2016
Rental equipment	$	7,567	$	9,835	$	11,429
Other property and equipment		2,463		1,960		2,028
Total depreciation and amortization	$	10,030	$	11,795	$	13,457

Summary of Property Plant and Equipment and Rental Equipment with Associated Accumulated Depreciation

Property and equipment and rental equipment with associated accumulated depreciation is summarized below as of December 31, 2018 and 2017, respectively.

(amounts in thousands)	December 31,
Property and equipment	2018		2017
Rental equipment, net of allowances of $594 and $754, respectively	$	43,038	$	49,349
Other property and equipment		21,596		15,219
Property and equipment		64,634		64,568
Accumulated depreciation
Rental equipment		31,813		34,754
Other property and equipment		10,480		9,711
Accumulated depreciation		42,293		44,465
Property and equipment, net
Rental equipment, net of allowances of $594 and $754, respectively		11,225		14,595
Other property and equipment		11,116		5,508
Property and equipment, net	$	22,341	$	20,103

Computation of Earnings Per Share

The computation of EPS is as follows:

	Years ended December 31,
(amounts in thousands, except share and per share amounts)	2018		2017		2016
Numerator—basic and diluted:
Net income	$	51,845	$	21,002	$	20,519

Denominator:
Weighted-average common shares - basic common stock (1)		21,266,696		20,683,807		20,067,152
Weighted-average common shares - diluted common stock		22,514,513		21,897,988		21,095,867

Net income per share - basic common stock	$	2.44	$	1.02	$	1.02
Net income per share - diluted common stock	$	2.30	$	0.96	$	0.97

Denominator calculation from basic to diluted:
Weighted-average common shares - basic common stock (1)		21,266,696		20,683,807		20,067,152
Stock options and other dilutive awards		1,247,817		1,214,181		1,028,715
Weighted-average common shares - diluted common stock		22,514,513		21,897,988		21,095,867
Shares excluded from diluted weighted-average shares:
Stock options		—		37,249		841,760
Restricted stock units and restricted stock awards		39,330		26,064		—
Shares excluded from diluted weighted-average shares		39,330		63,313		841,760

(1)

Unvested restricted stock units and restricted stock awards are not included as shares outstanding in the calculation of basic earnings per share. Vested restricted stock units and restricted stock awards are included in basic earnings per share if all vesting and performance criteria have been met. Performance-based restricted stock units and restricted stock awards are included in the number of shares used to calculate diluted earnings per share as long as all applicable performance criteria are met, and their effect is dilutive. Restricted stock awards are eligible to receive all dividends declared on the Company’s common shares during the vesting period; however, such dividends are not paid until the restrictions lapse.