Inogen (NASDAQ: INGN) reported Q1 EPS of $0.24, $0.06 worse than the analyst estimate of $0.30. Revenue for the quarter came in at $90.2 million versus the consensus estimate of $89.6 million.

GUIDANCE:

Inogen sees FY2019 revenue of $405-415 million, versus the consensus of $433.73 million.

Inogen is reducing its full year 2019 total revenue guidance to $405 to $415 million, down from $430 to $440 million, representing growth of 13.1% to 15.9% versus 2018 full year results. While the Company still expects direct-to-consumer sales to be its fastest growing channel, it plans to slow the pace of hiring in 2019 and place more emphasis on sales representative productivity. Inogen still expects international business-to-business sales to have a solid growth rate, but now expects domestic business-to-business sales to have a slightly negative growth rate. Given the difficult growth comparisons Inogen faces in the domestic business-to-business channel, the restructuring challenges of some providers, and its rental plan, it expects negative growth in the domestic business-to-business channel in the second quarter of 2019 compared to the second quarter of 2018, with modest growth in the back half of 2019 compared to the back half of 2018. Due to the ongoing restructure challenges some HME providers face, the Company plans to continue to look for ways to partner with providers to drive portable oxygen concentrator adoption. Inogen now plans to slightly change its rental intake criteria to accept more new rental patient additions to increase access to patients who otherwise could not obtain a portable oxygen concentrator from their current homecare provider. Since rental reimbursement revenue is recognized monthly compared to the mostly immediate revenue recognition of direct-to-consumer sales, the Company does not expect a meaningful rental revenue benefit from increasing its new rental setups until next year and beyond. While Inogen expects rental revenue to take time to ramp, the Company believes it can improve its close rate and lead usage by slightly changing its intake criteria on rental patients. Inogen continues to expect rental revenue to grow modestly in 2019.

The Company is reducing its full year 2019 GAAP net income guidance range to $36 to $38 million, down from $40 to $44 million, compared to 2018 GAAP net income of $51.8 million. This decrease in GAAP net income guidance range is primarily due to an estimated reduction in revenue and a decrease in estimated benefit in provision for income taxes related to excess tax benefits recognized from stock-based compensation from $4 million to $1 million, due to Inogen’s current stock price and fewer expected option exercises in 2019. When excluding the benefit from the estimated $1 million decrease in provision for income taxes expected in 2019 from stock-based compensation deductions, the Company still expects a non-GAAP effective tax rate of approximately 24% in 2019.

Inogen is reducing its full year 2019 operating income guidance range to $42 to $44 million, down from $46 to $50 million, representing growth of 10.8% to 16.1% versus 2018 full year results.

Inogen is reducing its full year 2019 Adjusted EBITDA guidance range to $66 to $68 million, down from $67 to $71 million, representing growth of 7.7% to 11.0% versus 2018 full year results.

The Company also expects net positive cash flow for 2019 with no additional equity capital required to meet its current operating plan, in spite of additional investments in rental assets. However, the Company expects lower cash flow than in 2018 as the Company increases rental investments and expects lower cash provided by stock option exercises.

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