ingn-10q_20190930.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 September 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 October 31, 2019, the registrant had 21,998,485 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 September 30, 2019 (unaudited) and December 31, 2018	3
	Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2019 and September 30, 2018	5
	Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Nine Months Ended September 30, 2019 and September 30, 2018	6
	Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2019 and September 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	32
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	90
Item 3.	Defaults Upon Senior Securities	90
Item 4.	Mine Safety Disclosures	90
Item 5.	Other Information	90
Item 6.	Exhibits	91
SIGNATURES		92

INOGEN, INC.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Inogen, Inc.

Consolidated Balance Sheets

(amounts in thousands)

	September 30,			December 31,
	2019			2018
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	156,131		$	196,634
Marketable securities		44,514			43,715
Accounts receivable, net		41,180			37,041
Inventories, net		34,072			27,071
Deferred cost of revenue		356			359
Income tax receivable		2,867			2,655
Prepaid expenses and other current assets		10,716			7,108
Total current assets		289,836			314,583
Property and equipment
Rental equipment, net		39,821			43,038
Manufacturing equipment and tooling		9,455			7,338
Computer equipment and software		7,051			6,153
Furniture and equipment		1,678			1,445
Leasehold improvements		4,295			3,407
Land and building		125			125
Construction in process		1,461			3,128
Total property and equipment		63,886			64,634
Less accumulated depreciation		(43,998	)		(42,293	)
Property and equipment, net		19,888			22,341
Goodwill		33,277			2,257
Intangible assets, net		79,536			3,755
Operating lease right-of-use asset		6,355			—
Deferred tax asset - noncurrent		11,176			30,130
Other assets		4,664			2,832
Total assets	$	444,732		$	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)

	September 30,		December 31,
	2019		2018
	(unaudited)
Liabilities and stockholders' equity
Current liabilities
Accounts payable and accrued expenses	$	30,418	$	26,786
Accrued payroll		6,700		11,407
Warranty reserve - current		4,311		3,549
Operating lease liability - current		2,193		—
Deferred revenue - current		5,835		4,451
Income tax payable		586		392
Total current liabilities		50,043		46,585
Long-term liabilities
Warranty reserve - noncurrent		7,165		5,981
Operating lease liability - noncurrent		5,123		—
Earnout liability - noncurrent		25,749		—
Deferred revenue - noncurrent		13,285		11,844
Deferred tax liability - noncurrent		221		232
Other noncurrent liabilities		—		832
Total liabilities		101,586		65,474
Commitments and contingencies (Note 10)
Stockholders' equity
Common stock, $0.001 par value per share; 200,000,000 authorized; 21,998,374 and 21,778,632 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		22		22
Additional paid-in capital		260,071		249,194
Retained earnings		82,809		60,484
Accumulated other comprehensive income		244		724
Total stockholders' equity		343,146		310,424
Total liabilities and stockholders' equity	$	444,732	$	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						Nine months ended
	September 30,						September 30,
	2019			2018			2019			2018
Revenue
Sales revenue	$	86,392		$	89,712		$	267,073		$	255,283
Rental revenue		5,369			5,579			15,953			16,297
Total revenue		91,761			95,291			283,026			271,580
Cost of revenue
Cost of sales revenue		44,769			42,810			134,066			124,726
Cost of rental revenue, including depreciation of $1,482 and $1,689, for the three months ended and $4,781 and $5,820 for the nine months ended, respectively		3,677			3,668			11,021			11,844
Total cost of revenue		48,446			46,478			145,087			136,570
Gross profit
Gross profit-sales revenue		41,623			46,902			133,007			130,557
Gross profit-rental revenue		1,692			1,911			4,932			4,453
Total gross profit		43,315			48,813			137,939			135,010
Operating expense
Research and development		2,636			2,096			5,773			5,287
Sales and marketing		24,047			26,339			80,006			67,376
General and administrative		8,525			9,982			27,050			29,230
Total operating expense		35,208			38,417			112,829			101,893
Income from operations		8,107			10,396			25,110			33,117
Other income (expense)
Interest income		1,149			895			3,877			2,111
Other income (expense)		(503	)		8			(478	)		(596	)
Total other income, net		646			903			3,399			1,515
Income before provision (benefit) for income taxes		8,753			11,299			28,509			34,632
Provision (benefit) for income taxes		1,890			(5,133	)		6,184			(7,168	)
Net income		6,863			16,432			22,325			41,800
Other comprehensive income (loss), net of tax
Change in foreign currency translation adjustment		(309	)		(47	)		(340	)		137
Change in net unrealized gains (losses) on foreign currency hedging		(420	)		102			(954	)		577
Less: reclassification adjustment for net (gains) losses included in net income		338			(354	)		796			(286	)
Total net change in unrealized gains (losses) on foreign currency hedging		(82	)		(252	)		(158	)		291
Change in net unrealized gains (losses) on marketable securities		(18	)		3			18			3
Total other comprehensive income (loss), net of tax		(409	)		(296	)		(480	)		431
Comprehensive income	$	6,454		$	16,136		$	21,845		$	42,231

Basic net income per share attributable to common stockholders (Note 7)	$	0.31		$	0.77		$	1.02		$	1.97
Diluted net income per share attributable to common stockholders (Note 7)	$	0.31		$	0.73		$	1.00		$	1.86
Weighted-average number of shares used in calculating net income per share attributable to common stockholders:
Basic common shares		21,840,473			21,324,256			21,802,468			21,175,286
Diluted common shares		22,191,688			22,659,052			22,387,146			22,512,125

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 September 30, 2019 and September 30, 2018
											Accumulated
						Additional					other			Total
	Common stock					paid-in			Retained		comprehensive			stockholders'
	Shares			Amount		capital			earnings		income			equity
Balance, June 30, 2018 (unaudited)		21,321,543		$	21	$	231,879		$	34,007	$	999		$	266,906
Stock-based compensation		—			—		3,216			—		—			3,216
Employee stock purchases		13,519			—		1,360			—		—			1,360
Restricted stock awards issued		3,557			—		—			—		—			—
Vesting of restricted stock units		8,707			—		—			—		—			—
Shares withheld related to net restricted stock settlement		(3,022	)		—		(801	)		—		—			(801	)
Stock options exercised		158,708			—		4,447			—		—			4,447
Net income		—			—		—			16,432		—			16,432
Other comprehensive loss		—			—		—			—		(296	)		(296	)
Balance, September 30, 2018 (unaudited)		21,503,012		$	21	$	240,101		$	50,439	$	703		$	291,264

Balance, June 30, 2019 (unaudited)		21,933,669		$	22	$	257,177		$	75,946	$	653		$	333,798
Stock-based compensation		—			—		1,565			—		—			1,565
Employee stock purchases		31,049			—		1,223			—		—			1,223
Restricted stock awards issued, net of forfeitures		24,456			—		—			—		—			—
Vesting of restricted stock units		3,441			—		(6	)		—		—			(6	)
Shares withheld related to net restricted stock settlement		(979	)		—		(46	)		—		—			(46	)
Stock options exercised		6,738			—		158			—		—			158
Net income		—			—		—			6,863		—			6,863
Other comprehensive loss		—			—		—			—		(409	)		(409	)
Balance, September 30, 2019 (unaudited)		21,998,374		$	22	$	260,071		$	82,809	$	244		$	343,146

	Nine months ended September 30, 2019 and September 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		—			—		9,783			—		—