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, 2017

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, 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

	As of December 31, 2016
			Gross					Cash
	Adjusted		unrealized					and cash		Marketable
(amounts in thousands)	cost		losses			Fair value		equivalents		securities
Cash	$	48,533	$	—		$	48,533	$	48,533	$	—
Level 1:
Money market accounts		39,277		—			39,277		39,277		—

Level 2:
Certificates of deposit		15,904		(8	)		15,896		5,041		10,855
Corporate bonds		10,200		(22	)		10,178		—		10,178
Agency mortgage-backed securities		—		—			—		—		—
Total	$	113,914	$	(30	)	$	113,884	$	92,851	$	21,033

Summary of Estimated Fair Value of Company's Investments in Marketable Debt Securities, Accounted for as Available-for-Sale Securities

The following table summarizes the estimated fair value of the Company’s investments in marketable securities, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities:

	December 31,
(amounts in thousands)	2017
Due within one year	$	30,991
Due in one year through five years		—
Total	$	30,991

Summary of Components of Accumulated Other Comprehensive Income (Loss)

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

	Foreign		Unrealized			Unrealized			Accumulated
	currency		gains (losses) on			gains (losses)			other
	translation		available-for-			on cash			comprehensive
(amounts in thousands)	adjustments		sale investments			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	2017		2016
Cash	$	46,237	$	48,533
Money market accounts		93,430		39,277
Certificates of deposit		490		5,041
Corporate bonds		2,796		—
Total cash and cash equivalents	$	142,953	$	92,851
Marketable securities
Certificates of deposit	$	10,516	$	10,855
Corporate bonds		17,972		10,178
Agency mortgage-backed securities		2,004		—
U. S. Treasury securities		499		—
Total marketable securities	$	30,991	$	21,033

Schedule of Gross Accounts Receivable Balance Concentrations by Major Category

Gross accounts receivable balance concentrations by major category as of December 31, 2017 and December 31, 2016 were as follows:

	As of					As of
(amounts in thousands)	December 31, 2017					December 31, 2016
Gross accounts receivable	$		%			$		%
Medicare	$	2,247		6.5	%	$	12,500		31.8	%
Medicaid/other government		295		0.8	%		617		1.6	%
Private insurance		1,411		4.1	%		3,475		8.8	%
Patient responsibility		2,283		6.6	%		3,227		8.2	%
Business-to-business & other receivables⁽¹⁾		28,474		82.0	%		19,541		49.6	%
Total gross accounts receivable	$	34,710		100.0	%	$	39,360		100.0	%

(1)

Business-to business receivables included one customer with an accounts receivable balance of $10,394 and $9,791 as of December 31, 2017 and December 31, 2016, respectively. This customer received extended payment terms through a direct financing plan offered. The Company also has a credit insurance policy in place, which allocates up to $12,000 in coverage as of December 31, 2017 and allocated up to $9,000 in coverage as of December 31, 2016 for this customer with a $1,000 deductible and 10% retention.

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, 2017 and December 31, 2016 were as follows:

	As of					As of
(amounts in thousands)	December 31, 2017					December 31, 2016
Net accounts receivable	$		%			$		%
Medicare	$	1,501		4.7	%	$	7,208		23.4	%
Medicaid/other government		244		0.8	%		410		1.3	%
Private insurance		1,249		4.0	%		1,832		6.0	%
Patient responsibility		1,218		3.9	%		2,538		8.2	%
Business-to-business & other receivables ⁽¹⁾		27,232		86.6	%		18,840		61.1	%
Total net accounts receivable	$	31,444		100.0	%	$	30,828		100.0	%

(1)

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, 2017 and December 31, 2016.

	As of					As of
(amounts in thousands)	December 31, 2017					December 31, 2016
Net accounts receivable by aging category	$		%			$		%
Held & Unbilled	$	537		1.7	%	$	4,163		13.5	%
Aged 0-90 days		29,237		93.0	%		22,634		73.4	%
Aged 91-180 days		435		1.4	%		1,452		4.7	%
Aged 181-365 days		602		1.9	%		1,801		5.9	%
Aged over 365 days		633		2.0	%		778		2.5	%
Total net accounts receivable	$	31,444		100.0	%	$	30,828		100.0	%

Schedule of Allowances for Accounts Receivable

The following table sets forth the accounts receivable allowances as of December 31, 2017 and December 31, 2016:

	As of					As of
(amounts in thousands)	December 31, 2017					December 31, 2016
Allowances - accounts receivable	$		%			$		%
Doubtful accounts	$	1,415		4.1	%	$	1,869		4.7	%
Rental revenue adjustments		947		2.7	%		6,078		15.4	%
Sales returns		904		2.6	%		585		1.5	%
Total allowances - accounts receivable	$	3,266		9.4	%	$	8,532		21.6	%

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 73.5% of the non-U.S. revenue for 2017 were invoiced in Euros. A breakdown of the Company’s revenue from U.S. and non-U.S. sources for the years ended December 31, 2017, 2016 and 2015 is as follows:

	Years ended December 31,
(amounts in thousands)	2017		2016		2015
U.S. revenue	$	193,919	$	152,723	$	123,660
Non-U.S. revenue		55,519		50,106		35,345
Total revenue	$	249,438	$	202,829	$	159,005

Schedule of Inventories

Inventories that are considered current consist of the following:

	December 31,
(amounts in thousands)	2017			2016
Raw materials and work-in-progress	$	16,324		$	12,382
Finished goods		2,917			2,152
Less: reserves		(399	)		(191	)
Inventories	$	18,842		$	14,343

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	2-5 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, 2017, 2016 and 2015, respectively.

	Years ended December 31,
(amounts in thousands)	2017		2016		2015
Rental equipment	$	9,835	$	11,429	$	11,965
Other property and equipment		1,960		2,028		1,961
Total depreciation and amortization	$	11,795	$	13,457	$	13,926

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, 2017 and 2016, respectively.

(amounts in thousands)	December 31,
Property and equipment	2017		2016
Rental equipment, net of allowances of $754 and $725, respectively	$	49,349	$	54,582
Other property and equipment		15,219		12,633
Property and equipment		64,568		67,215

Accumulated depreciation
Rental equipment		34,754		33,937
Other property and equipment		9,711		8,079
Accumulated depreciation		44,465		42,016

Property and equipment, net
Rental equipment, net of allowances of $754 and $725, respectively		14,595		20,645
Other property and equipment		5,508		4,554
Property and equipment, net	$	20,103	$	25,199

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)	2017		2016		2015
Numerator—basic and diluted:
Net income	$	21,002	$	20,519	$	11,585

Denominator:
Weighted-average common shares - basic common stock (1)		20,683,807		20,067,152		19,398,991
Weighted-average common shares - diluted common stock		21,897,988		21,095,867		20,708,170

Net income per share - basic common stock	$	1.02	$	1.02	$	0.60
Net income per share - diluted common stock	$	0.96	$	0.97	$	0.56

Denominator calculation from basic to diluted:
Weighted-average common shares - basic common stock (1)		20,683,807		20,067,152		19,398,991
Warrants		—		—		10,579
Stock options and other dilutive awards		1,214,181		1,028,715		1,298,600
Weighted-average common shares - diluted common stock		21,897,988		21,095,867		20,708,170
Shares excluded from diluted weighted-average shares:
Stock options		37,249		841,760		744,301
Restricted stock units and restricted stock awards		26,064		—		—
Shares excluded from diluted weighted-average shares		63,313		841,760		744,301

(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.