Good day, ladies and gentlemen. And welcome to the Inogen 2016 First Quarter Financial Results Conference Call. All participants are in a listen-only mode. Later, [Operator Instructions] After today's presentation there will be an opportunity to ask question. [Operator Instructions] Please note this even is being recorded. I would now like to turn the conference over to Mark Klossner. Please go ahead.

Thank you for participating in today’s call. Joining me from Inogen is CEO, Ray Huggenberger; President and COO, Scott Wilkinson; and CFO and Co-founder, Ali Bauerlein. Earlier today, Inogen released financial results for the first quarter ended March 31, 2016. This earnings release and Inogen's corporate presentation are currently available in the Investor Relations section of the company’s website. During the call and the subsequent Q&A session, we will be discussing plans and projections for our business, future financial results and market trends and opportunities including among others, statements regarding future product releases specifications, product launch date expectations, our strategic focus and objectives, hiring expectations, seasonality, our estimates of the impact of reductions in Medicare and insurance reimbursement rates and our ability to offset those reductions, changes to the competitive bidding process, cost reduction expectations, expectations for profitability improvement and 2016 guidance including revenue, adjusted EBITDA, adjusted net income, net income, net cash flow, effective tax rates and tax benefits. These statements are forward-looking and are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from currently anticipated events or results. Information on these and additional risks, uncertainties and other information affecting Inogen's business operating results are contained in Inogen's annual report on Form 10-K for the year ended December 31, 2015 and in Inogen's subsequent reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission, including Inogen's quarterly reports on Form 10-Q for the period ending March, 31, 2016 to be filed with the Securities and Exchange Commission. We advise investors to review these risk factors carefully. The forward-looking statements in this call are based on information available to us as of today’s date May 09, 2016, and we disclaim any obligation to update any forward-looking statements except as required by law. During the call, we will also present certain financial information on a non-GAAP basis. 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 forecast and strategic plans to benchmark Inogen's performance externally against competitors and for certain compensation decisions. Reconciliation between U.S. GAAP and non-GAAP results are presented in the table accompanying our earnings release which can be found in the Investors section of our website. I will now turn the call over to Ray Huggenberger. Ray?

Thank you, Mark. Good afternoon, everyone. And thank you for joining for our first quarter 2016 conference call. On our call today I will start with the financial and business highlights. Then Scott will cover our recent operational developments and finally Ali will review the financials and 2016 guidance. At that point, we will open the call up for questions. Despite reimbursement headwinds we had a solid start to 2016 with revenues of $43 million in first quarter which represented 27.4% growth from the same period last year. Notably sales revenue grew 42.4% in the first-quarter 2016 versus the comparative period in 25th team and represented 76.3 % of revenue. The highest percent of total revenue in the Company's history despite the first quarter seasonally weakest of the year. Demand for our portfolio of innovative concentrated concentrators remained strong and both our business to business and direct to consumer sales revenue channel. The strong performance offset the anticipated rental revenue decline primarily due to the reductions in Medicare reimbursement. Domestic business-to-business sales was our strongest growth channel in the first quarter of 2016. Increasing 61.2% over the first quarter of 2016. We believe the strengths in this channel came from several sources. Led by private-label sales which contributed to the majority of the increase in this channel and the first quarter of 2016 compared to the first quarter of 2015. As a reminder, private-label sales began on the first quarter of 2015 but to our a very small contributor in the domestic business-to-business sales channels in quarter. Internationally we saw good sales growth of 18.7% in the first quarter of 2016 compared to the first quarter of 2015 due to the continued strength in Europe with our partners in key accounts. Sales in Europe continue to represent the majority of…

Thank you Ray. As a Company Inogen is committed to product innovation. The improvements we recently made 200 Inogen One G3 have positive market acceptance and Mrs. product is available across all our sales and rental channels. We're very excited about the upcoming launch of the Inogen One G3 Inogen One G4 which we believe will provide the opportunity to increase freedom and mobility to thousands of oxygen patients worldwide. At approximately half the size in the Inogen One G4 weighs only two point pounds versus 4.8 pounds for our Inogen One G3 portable oxygen concentrator. The sound level is approximately 40 dB at setting to end it produces a 600 of supplemental oxygen per minute supply through our intelligent delivery technology. We estimate that it will be suitable for more than 85% of a supplemental long-term ambulatory oxygen therapy patients who contact us. The Inogen One G4 is not only smaller and lighter than our current Inogen One G2 and Inogen One G3 products but it is also less expensive to manufacture. Shipments of the Inogen One G4 in our direct-to-consumer sales channel are expected to begin before the end of this month. Over time we expect the Inogen One G4 to be our flagship product and our direct to consumer sales channel. We will issue a press relates to announce the formal launch of the product. Expect to expand shipments to our business-to-business channel in the third quarter of 2016. At lunch we do not plan to make the Inogen One G4 available for rental and we will continue to use the Inogen One G3 is the primary product deployed in our rental fleet. And 2016 international channel we expect minimal sales of Inogen One G4 due to the timing of product regulatory and reimbursement approvals. We expect…

Okay. Thanks, Scott and good afternoon everyone. During my prepared remarks I will review the details of the first quarter financial performance and then I will review the our guidance for 2016. As Ray noted total revenue for the first quarter of 2016 was $43 million representing 27.4% growth over the first quarter of 2015. Looking at each of our revenue streams and turning first to our sales revenue total sales revenue was 32.8 in dollars. Reflecting 42.4% growth over the same quarter of the prior year and representing 76.3% of total revenue. Total units sold increased to 17,000 in the first quarter of 2016 up 54.5% from the first quarter of 2015. Domestic is less to business sales were $9.5 million in the first-quarter of 2016 and it was our fastest growing channel in the quarter. Up 61.2% over the same period in the prior year. I'm really due to increasing private label demand for portable oxygen concentrators. In addition reseller and traditional home medical provider sales contributed to the growth in the first quarter of 2016 versus the same period in the prior year. International business-to-business sales were $10 million representing 18.7% growth versus the same period in the prior year. Primarily due to continued strong demand from our European partners. Business-to-business average selling prices in the first-quarter of 2016 declined over the same period in the prior year I'm really due to an increased mix toward private label sales and additional discounts associated with the increased sales volumes worldwide. Direct-to-consumer sales for the first quarter of 2016 worth $13.4 million representing 52.4% growth over the first quarter of 2016 10 I'm really due to the increased inside sales headcount and increased marketing spend to drive consumer awareness. Now turning to rental revenue. Direct consumer rental revenue in…

[Operator Instructions] The first question is from Mike Weinstein at JPMorgan. Q – Unidentified Analyst: This is Robbie Marcus in for Mike. Congrats on the good quarter. Just wanted to start out. It looks like your DTC sales continue to do well came in about what we were expect thing. Maybe you can help us understand how much is the benefit from the reps you hired in the third quarter coming up to speed now. How much is more critical mass in the market? How much is your marketing campaign ? Maybe give us a flavor for what is driving the continued growth here and how we should be thinking about that through the rest of the year? A – Scott Wilkinson: Sure Robbie this is Scott. I will take that one. The majority of the increase that we saw in the first quarter is driven by the Representative increase in the second half of last year . In particular what you see in the first-quarter is really driven by the third-quarter reps because as you recall it takes for to six months for a rough to come up to speed . What we are seeing now is really reaping the seats that were planted in the third quarter. Now when addition to that there are some productivity improvements. We make productivity improvements on an ongoing basis at if I had to scale it I would say the vast majority of the increase is due to the increased sales capacity. When you look at increased media we scale our media right along with our sales reps. We don't want to overspend our sales reps then you have a bunch of leads that are useless and you don't want to underspending start them. As we scale that sales team we scale…

Let me know this is a little bit better. Only domestic B2B side I don't know if you guys can provide the split between how much that gross was between the private label or sales and some of the online resellers. But maybe tell us a little bit about how those online reseller gross is going and how that growth should or should not accelerate with the G4 launch in the second half of this year? A – Ray Huggenberger: I'll take some of the numbers first maybe Scott can also jump in here. But if you look at the business-to-business domestic sales channel private label sales was the majority of the increase year over year in the first quarter of 2016. So it continues to be a strong contributor to the overall growth in that channel but resellers are still the majority of sales in that specific revenue channel. So resellers are still very critical to our overall success in that channel and there will be a rollout of sales into that channel. Initially we will be capacity constrained with the Inogen One G4 we will start with our direct consumer sales and moving into the third-quarter we will begin opening that to resellers in other business to business accounts. We do expect that to have an impact going into the second half of 2016. Scott anything to add

Yes I think you heard from the size and weight of the G4 . 2.8 pounds. This is clearly a product that is designed with patients in mind first. If I look at our sales channels or sales buckets that to that would benefit the most from a G4 which is targeted right at patients would be our own direct to consumer sales team and then the Internet resellers that are primarily selling retail cash sales directly to patients. As we roll that out to them in the third-quarter we expect they are going to be as excited about that product as we are.

And one of the questions being that the comps get a little difficult in the back half of the year. Is because the online the private label or sales really increased in the second half of 2015. How do you think that growth , private label or side can come in as strongly as it has so far and then second of all obviously can the acceleration in some of these online retail sellers due to the launch of the G4 offset any potential kind of growth more difficult comps on that.

Yes it's an interesting dynamic is year because we've got a lot of things in play compared to history. As Ali said seasonally the second quarters usually our high watermark and if we look back over several years we've got a track record that substantiates that. This year with G4 launching, mid-second quarter and we will have it through the full second-half of the year, that is a tailwind for us that could change seasonality and actually have higher sales in the second half of the year than traditional work it's an opportunity to see that happen. With regard to the private label sales it's still a little early to call out exactly what the growth rate is going to be or if the growth rate is sustainable . In the first-quarter this is really our first-quarter in 2016 where we've got a village year over year and even so if you look at the first quarter of 2015 it was at the very beginning of the launch. It's a little early to tell where that's going to go but we've got a great relationship with these guys and we're thankful for the solid partnership . We have expectations that we can continue to use this as a viable method to reach that HME channel. On the other side you've got obviously the reimbursement decline in the second half of the year that will hit again in July so that works against us. We are not to know how these things shake out until they happen. We've got some puts and calls some things that are in our favor and some that work against us and we will have to see.

Expand on that a bit domestic B2B. Clearly seeing greater than 60% growth in the first quarter is not our expectation going into the rest of the year. So we do expect that to come down as we annualize the private label sales really starting in the second quarter of is when the sales become more substantial . But we do expect to continue to grow in e-channel but with direct consumer being our lead revenue channel for the remainder of the year.

You beat me to the pension what will be in kind. I appreciate that. On the gross margin side just a follow-up on Rob's question earlier given the way the trajectory of what you guys are doing your 49.5% gross margin another some reimbursement pressure as we go into the second half of the year but walk me through why this can't be a 50% plus gross margin Company are sent you guys look Operating margin and adjusted EBITDA for your comp and how you structure the Company , why can't this be over the next several years a 15% plus margin Company or more . Thank you.

Sure as you know we don't give specific gross margin guidance and the reason we don't give specific gross margin guidance is because it really is heavily mixed dependent and as we have different contributions from business to business versus direct consumer, it does have a large impact on our gross margin. And we also know that reimbursement cuts that are coming incrementally in the second half of 2016 will also be an additional headwind to our overall gross margin strategy. You know when we look at the operating expense side the direct to consumer side of the business also has higher operating expenses associated with it. So the mix of direct to consumer versus business to business also has an impact on that OpEx leverage but clearly helps the overall dollars and is typically net margin accretive when you add those dollars. We haven't put out a long-term operating margin profile for the Company . But we do expect to continue to be able to show leverage there I think incrementally improve that a lot will also have to do with the growth rate of the Company . As we see opportunities to continue to expand our sales force because we are in the early stages of CSC adoption we feel like that's more important than getting to the mall OpEx margin because we want to be able to be able to maintain market share leadership. 15% target also really depends on it time horizon and how the market shifts between us selling the product to businesses or a mix of the direct consumer strategy and how that develops. That will have a big impact on that ratio over time. So at this point what is important to us is to continue to stay at the forefront of leading the POC charge and the switch in the industry not necessarily a specific long-term margin profile.

Great. Thank you.

Next question from Danielle Antalffy of Leerink Partners

Thanks for taking the question. And congratulations on another good quarter. I was wondering if you guys could give a little bit of color on what you're seeing from the DME and whether they are starting to pay more attention to POCs . Obviously you guys had a strong domestic B2B quarter. I understand those are largely sounds like from private label it just wondering if this is getting more on the radar screen of some of the and are you seeing them push POCs a little bit more than you have historically?

Yes. Thanks Danielle. The big question is what does the industry going to do in light of the reimbursement environment that is going to be prevailing starting in July of this year. It would be a logical assumption that the industry is going to accelerate the switch to non-delivery technology and with the delivery technology the logical assumption is that the POC is the best and most cost-effective solution for the industry. But these are logical assumptions. That would suggest the adoption would accelerate in light of lower reimbursement more challenging reimbursement rates. We don't know what the baseline is. It is logical to assume that it will pick up . It is very hard to predict to what extent or how fast it would have picked up at the reimbursement rates would be the same as they are today. I hate to give weighted see answers but unfortunately this is another one I kind of have to say you would assume that it would go a little faster. How fast , we are going to have to wait and see.

Yes that's totally fair. I guess my follow-up to that run rate would be in an environment in which DME's might start to push POCs that let's assume that's what happens. I understand the markets highly underpenetrated probably see happen is the market grow pretty significantly . Can you talk a little more how Inogen competes in an environment like that that comes increasingly competitive with the .

I will take that one Daniel. It starts with share leadership and being the market leader. As people look to convert to POCs logically we were they look first ? You will look to the leader. What Company is already established themselves at the front of the line ? Which Company is the partner that can help show them the ropes if they want to convert their business ? That's a Company that's already running a successful nondelivery business ourselves. As far as our strategy and how we go to market, it goes back to our private label.. With them we've got feet on the Street that are out in the market that can work with the HME suppliers that if they're interested in converting to POCs and accessing our product the private-label partner that we have established as the perfect was to start . And of course we're here to help that private-label partner so our experts are out in the field through the transition.

Okay. Thanks so much.

Our next question is from Mike Matson of Needham & Co.

I guess I just wanted to ask about their was a comment in the press release about an increase in provisions for rental adjustments. Can you explain what that is what that means?

Sure. Yes so rental revenue watch rental revenue adjustment is is basically when you Billy claim there's a certain percent of claims that end up not getting accepted by the carrier and so those come off of rental revenue as an adjustment on top of that you also have scenarios where patients passed away and you can't bill for the whole quarter associated with those patients. We typically see in the first quarter of any year higher rental revenue adjustment rate and a portion of that is associated with in the colder months you typically see higher death rate of the patient population . You also see a higher rates of patients changing insurance in first quarter as they switch between Medicare and other plans that can lead to write-offs associated with those patients and those periods. We did have higher rental revenue adjustment in the quarter . Obviously the biggest driver of the change in rental revenue from the sequential quarter was associated with the reimbursement cuts and that was significant portion 800 800,000 900,000 decline in revenues in the sequential quarters with the remainder $400,000 $400,000-$500,000 being associated with higher rental revenue adjustments in the period .

All right. That's helpful. Just down the G4, I appreciate the insight into what some of the specs look like that I was curious just around the battery life are there any improvements on that area . And seems like you are really leapfrogging the competitors here in terms of anything that is out there. It just wondering if you have any insight whether they are even close to coming out with something on this size and weight range?

Yes a couple comments on the spec. First of all thank you for the compliment on the product. We are excited about a step change that is that right. you know is you can imagine it's pretty difficult when you're down under 5 pounds are ready to make another 2 pound drop and not compromise from a clinical standpoint. It should keep us out in front. We don't know exactly what other people have under the hood in there development lab but we are excited about what we have to bring to the party. We don't know anything that would be close to what we are launching and as we have done our comps against all the other products in the space the G4 has the highest up per pound of any product out there and that actually includes the stationary concentrators as well. It's any home oxygen concentrator mobile or stationary as far as the rest of the suite of specs we will release those when we have our formal launch before the end of the month and redo the press release. The battery times with different batteries and all that global release at a later date we don't have all of those right now at that should be coming shortly.

Okay. Thanks. And then Ali the quarter overall was good in terms of revenue. I mean a lot of upside. The operating margin was a little lower than we had expect did. I know you have commented on this in response to some of the earlier questions I just want to make sure that I'm understanding where we're coming from on this. The limited leverage operating leverage that you saw in the third quarter you are making some conscious decisions to invest in the business and grow the sales force and things like that which may somewhat come at the expense of some margin expansion. But with the hopes that drives more revenue growth is that you are making an investment decision essentially ? In my hearing you correctly?

Yes that's fair. What I also want to remind you is the first quarter is typically the weakest quarter in terms of operating expense leverage during the year.Because when you look at the conversions that's typically where we see the lowest conversion of our direct consumer media into sales. So that certainly always has an impact in the business where it drives our operating expense leverage . Particularly given we had the higher amount of direct to consumer sales in the period. And you have that the lowest conversion in that quarter that does drive higher operating expenses in the period to reach the sales revenues and then we did have the one time $1 million litigation settlement that's included in operating expenses as an accrual that also impact did our overall expense ratio .

Okay. Thank you.

Our next question is from Matthew O'Brien of Piper Jaffray

Just G4 here. Are you seeing or hearing in it totally from your sales force I know you have really good and beat it be performance domestically are you seeing or hearing it slow down in purchasing among your customers as the are anticipating the launch of that product or you kind of telling us you're already seeing that guarantee basically halfway through the quarter. And back it be somewhat of a little bit of a headwind Q2 and then start to see the tailwind and stick the second half of the year

No there is no discernible slow down and current sales associated with G4. We have actually been pretty careful to keep the specs to ourselves and in fact it's the first time we have publicly announced anything about the G4 from a specs standpoint beyond it Inc. smaller than G3 and less expensive to manufacture. So at the same time we are communicating this to you folks we're in the process of training our sales force. We keep them just as much in the dark as we do everybody else so they can focus on selling the product that's available to them today . But we are starting to ramp up those training activities so we can launch G4 before the end of the month.

Okay fair enough. Also in the press release it meant increase in sale concessions can you just talk a little about what's going on there?

Can you say that again?

I think in the press release you mentioned be to be maybe international you see an increase in sales concessions and what's the reason for that increase?

Yes so we have seen on the international side price concession associated with higher volume worldwide. So as our key accounts and key customers have bought in higher volume , we have given additional price discounts associated with that incremental volume . And so that's

Traditional more volume lower pricing kind of thing. Got it. Absolutely. Ali one more question for you real quick . The AR and inventory level pretty dramatically in Q1 on a sequential basis, why was that?

Yes so as that's very typical in the first quarter again to see the trend Accounts Receivable increasing . If you recall there is an annual deductible associated with the Medicare business and private insurance is as well. And a so that typically delays Kass collection in the first quarter. We also had an increase in AR associated with our business to business sales so those were the two drivers of the accounts receivable increase. On the inventory side as we are both ramping up the Inogen One G3 upgrade which did include some new materials as well as preparing ourselves for the launch of the Inogen One G4 , those both contributed to the higher inventory levels as you have product launches that is pretty typical.

Okay but no major changes in the AR side in terms of customers.

No. Nothing material.

Got it . Thanks.

This concludes our question and answer session and the conference is now concluded. Thank you. for attending today's presentation. You may now disconnect.