Inogen Announces Third Quarter 2019 Financial Results - Q3 2019 Total Revenue of $91.8 million - - Confirms 2019 Guidance and Provides Initial 2020 Guidance - Goleta, California

Inogen Announces Third Quarter 2019 Financial Results

- Q3 2019 Total Revenue of $91.8 million -

- Confirms 2019 Guidance and Provides Initial 2020 Guidance -

Goleta, California, November 5, 2019 - Inogen, Inc. (NASDAQ: INGN), a medical technology company offering innovative respiratory products for use in the homecare setting, today reported financial results for the three-month period ended September 30, 2019.

Third Quarter 2019 Highlights

"We are pleased with our third quarter results and we continue to make progress in addressing the issues we face in our direct-to-consumer sales organization," said Scott Wilkinson, Inogen's President and Chief Executive Officer. "Direct-to-consumer sales outperformed in the third quarter, primarily due to our focus on improving the productivity of our existing salesforce, while also investing in new sales representatives to drive future growth. As a result, we expect direct-to-consumer sales to be our fastest growing channel in 2020, contributing to our expected total revenue in 2020 of $410 to $415 million."

Third Quarter 2019 Financial Results

Total revenue for the three months ended September 30, 2019 declined 3.7% to $91.8 million from $95.3 million in the same period in 2018. Direct-to-consumer sales declined modestly to $37.8 million in the third quarter of 2019 versus $38.3 million in the same period in 2018. This decline was primarily due to increased productivity, despite an approximate 40% reduction in sales representative headcount compared to the same period in 2018. Given the increase in productivity in the third quarter of 2019, the Company remains optimistic in its ability to grow direct-to-consumer sales in 2020 with a more measured, planned expansion of its sales and rental intake teams.

Domestic business-to-business sales were flat compared to the same period in 2018, primarily due to the previously announced decline in orders from one large national provider who buys through the Company's private label partner, offset by increased orders from other providers. Specifically, this provider accounted for revenue of $0.8 million in the third quarter of 2019, down from $3.3 million in the third quarter of 2018. Despite the challenges the home medical equipment industry faces in adopting portable oxygen concentrators, which include ongoing restructuring efforts, lack of access to available credit and capital expenditure constraints, Inogen continues to see solid demand from these customers.

International business-to-business sales declined 12.5% in the third quarter of 2019 (10.2% decline on a constant currency basis) from the comparative period in 2018. The decline was primarily driven by a slowdown of orders in Great Britain and Spain due to tender uncertainty, capital expenditure constraints, and some softness of orders in France. The Company believes that when the tender issues are resolved, demand will normalize for Inogen products in those countries.

Rental revenue in the third quarter of 2019 was $5.4 million compared to $5.6 million in the third quarter of 2018, representing a decline of 3.8%, primarily due to a 6.9% decrease in patients on service, partially offset by higher rental revenue per patient.

Total gross margin was 47.2% in the third quarter of 2019 versus 51.2% in the comparative period in 2018. Sales gross margin was 48.2% in the third quarter of 2019 versus 52.3% in the third quarter of 2018. The sales gross margin decrease was primarily due to increased mix of lower margin domestic business-to-business sales versus international business-to-business sales, partially offset by increased sales mix towards higher margin domestic direct-to-consumer sales. In addition, the Company had higher cost per unit primarily associated with the Inogen One G5, which was not at full scale relative to the other Inogen One systems. The Company expects Inogen One G5 volumes to reach full scale by the third quarter of 2020 and to be the lowest cost product to manufacture at that time. Rental gross margin was 31.5% in the third quarter of 2019 versus 34.3% in the third quarter of 2018. The decrease in rental gross margin was primarily due to higher service costs, partially offset by increased rental revenue per patient on service and lower depreciation expense.

Total operating expense decreased to $35.2 million, or 38.4% of revenue, in the third quarter of 2019 versus $38.4 million, or 40.3% of revenue, in the third quarter of 2018, primarily due to lower personnel-related expenses. Research and development expense increased to $2.6 million in the third quarter of 2019 versus $2.1 million in the comparative period in 2018, primarily associated with $1.0 million in New Aera intangible amortization expense incurred in the third quarter of 2019. Sales and marketing expense decreased to $24.0 million in the third quarter of 2019 versus $26.3 million in the comparative period in 2018, primarily due to decreased personnel-related expenses associated with the 40% decline in average sales representative headcount in the comparative period in 2018. General and administrative expense decreased to $8.5 million in the third quarter of 2019 versus $10.0 million in the comparative period in 2018, primarily due to decreased personnel-related expenses, partially offset by $0.3 million of New Aera transaction costs.

Operating income for the three months ended September 30, 2019 declined to $8.1 million, or 8.8% of revenue, down from $10.4 million, or 10.9% of revenue, in the comparative period in 2018. Adjusted EBITDA for the three months ended September 30, 2019 declined to $12.8 million, or 14.0% of revenue, down from $16.3 million, or 17.1% of revenue, in the comparative period in 2018. The reduction in third quarter 2019 Adjusted EBITDA margin compared to the third quarter of 2018 was primarily due to lower gross profit, partially offset by lower operating expenses.

In the third quarter of 2019, the Company reported income tax expense of $1.9 million, compared to income tax benefit of $5.1 million in the third quarter of 2018. Inogen's income tax expense in the third quarter of 2019 included $0.1 million of excess tax deficiencies recognized from stock-based compensation compared to an $8.1 million benefit in the third quarter of 2018. Excluding the excess tax benefits (deficiencies) from stock-based compensation, Inogen's non-GAAP effective tax rate was 20.9% in the third quarter of 2019 versus 26.4% in the third quarter of 2018. A reconciliation of GAAP and non-GAAP measures is included in the accompanying tables attached hereto.

In the third quarter of 2019, the Company reported net income of $6.9 million compared to $16.4 million in the third quarter of 2018. Earnings per diluted common share was $0.31 in the third quarter of 2019 versus $0.73 in the third quarter of 2018.

Cash, cash equivalents, and marketable securities were $200.6 million as of September 30, 2019, down $55.5 million from the second quarter of 2019, primarily due to the $70.5 million payment to New Aera as part of the acquisition closing. The Company had no debt outstanding as of September 30, 2019.

Financial Outlook for 2019

Inogen is maintaining its full year 2019 total revenue guidance of $370 to $375 million, representing growth of 3.3% to 4.7% versus its 2018 full year results. The Company is also maintaining its full year 2019 net income guidance range of $23 to $25 million, operating income guidance range of $26 to $28 million, and Adjusted EBITDA guidance range of $49 to $51 million.

Financial Outlook for 2020

The Company is also providing a full year 2020 guidance range for total revenue of $410 to $415 million, representing 10.1% to 11.4% growth over the 2019 guidance mid-point of $372.5 million. The Company expects direct-to-consumer sales to be its fastest growing channel and expects domestic business-to-business and international business-to-business channels to have a solid growth rate. The Company expects rental revenue to be up modestly compared to 2019. The Company expects sales of the New Aera products to begin in 2020, with minimal contribution to its revenue. The Company expects tougher comparables in the first half of 2020 versus the remainder of the year.

The Company forecasts full year 2020 net income to be in the range of $25 to $27 million, representing growth of 4.2% to 12.5% over the 2019 guidance mid-point of $24 million. Inogen expects a GAAP effective tax rate of approximately 25% in 2020. Net income also includes an estimated $7.8 million in New Aera intangible amortization expense recorded in research and development expense in 2020 compared to an estimated $2.9 million in 2019.

The Company is also providing a guidance range for full year 2020 Adjusted EBITDA of $56 to $58 million, representing 12.0% to 16.0% growth over the 2019 guidance mid-point of $50 million.

The Company expects net positive cash flow for 2020 with no additional capital required to meet its current operating plan.

Individuals interested in listening to the conference call today at 1:30pm PT/4:30pm ET may do so by dialing (855) 238-8123 for domestic callers or (412) 317-5217 for international callers. Please reference Inogen (INGN) to join the call. To listen to a live webcast, please visit the Investor Relations section of Inogen's website at: http://investor.inogen.com/.

A replay of the call will be available beginning November 5, 2019 at 3:30pm PT/6:30pm ET through November 12, 2019. To access the replay, dial (877) 344-7529 or (412) 317-0088 and reference Access Code: 10136360. The webcast will also be available on Inogen's website for one year following the completion of the call.

Inogen has used, and intends to continue to use, its Investor Relations website, http://investor.inogen.com/, as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. For more information, visit http://investor.inogen.com/.

Inogen is innovation in oxygen therapy. We are a medical technology company that develops, manufactures and markets innovative oxygen concentrators used to deliver supplemental long-term oxygen therapy to patients suffering from chronic respiratory conditions.

For more information, please visit www.inogen.com.

Cautionary Note Concerning Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, among others, statements regarding anticipated growth opportunities; expectations for all revenue channels for full year 2019 and 2020; financial guidance for 2019 and 2020, including revenue, net income, operating income, Adjusted EBITDA, intangible amortization costs, and GAAP effective tax rates; expectations regarding international sales and tender activity; expectations regarding the Inogen One G5; and the estimated impact to Inogen's 2019 and 2020 revenue, operating expenses, and costs associated, in each case, with the acquisition. Any statements contained in this communication that are not statements of historical fact may be deemed to be forward-looking statements. Words such as "believes," "anticipates," "plans," "expects," "will," "intends," "potential," "possible," and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from currently anticipated results, including but not limited to, risks arising from the possibility that Inogen will not realize anticipated revenue; the impact of reduced reimbursement rates; the possible loss of key employees, customers, or suppliers; risks relating to Inogen's limited experience in acquiring and integrating new businesses; risks relating to the integration of New Aera's business and operations within those of Inogen; risks relating to reimbursement coding of the SideKick TAV; the possibility that Inogen will not realize anticipated revenue or that expenses and costs will exceed Inogen's expectations; the possible loss of key employees,

customers, or suppliers in connection with the acquisition; the challenges of achieving synergies in connection with the acquisition; intellectual property risks if Inogen is unable to secure and maintain patent or other intellectual property protection for the intellectual property used in its products; and intellectual property risks relating to the acquisition, including the risk of intellectual property litigation. In addition, Inogen's business is subject to numerous additional risks and uncertainties, including, among others, risks relating to market acceptance of its products; competition; its sales, marketing and distribution capabilities; its planned sales, marketing, and research and development activities; interruptions or delays in the supply of components or materials for, or manufacturing of, its products; seasonal variations; unanticipated increases in costs or expenses; and risks associated with international operations. Information on these and additional risks, uncertainties, and other information affecting Inogen's business operating results are contained in its Quarterly Report on Form 10-Q for the period ended June 30, 2019, and in its other filings with the Securities and Exchange Commission. Additional information will also be set forth in Inogen's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, to be filed with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. Inogen disclaims any obligation to update these forward-looking statements except as may be required by law.

Use of Non-GAAP Financial Measures

Inogen has presented certain financial information in accordance with U.S. GAAP and also on a non-GAAP basis for the three and nine months ended September 30, 2019 and September 30, 2018. Management believes that non-GAAP financial measures, taken in conjunction with U.S. GAAP financial measures, provide useful information for both management and investors by excluding certain non-cash and other expenses that are not indicative of Inogen's core operating results. Management uses non-GAAP measures to compare Inogen's performance relative to forecasts and strategic plans, to benchmark Inogen's performance externally against competitors, and for certain compensation decisions. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of Inogen's operating results as reported under U.S. GAAP. Inogen encourages investors to carefully consider its results under U.S. GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. Reconciliations between U.S. GAAP and non-GAAP results are presented in the accompanying tables of this release. For future periods, Inogen is unable to provide a reconciliation of non-GAAP measures without unreasonable effort as a result of the uncertainty regarding, and the potential variability of, the amounts of interest income, interest expense, depreciation and amortization, stock-based compensation, provision for income taxes, and certain other infrequently occurring items, such as acquisition-related costs, that may be incurred in the future.

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-- Financial Tables Follow --