Vapotherm Reports First Quarter 2021 Financial Results

Rhea-AI Summary

Vapotherm (NYSE: VAPO) reported a remarkable 69% revenue increase to $32.3 million in Q1 2021 compared to Q1 2020. The global installed base of Precision Flow Hi-VNI systems surged by 73%, boosting gross margins to 53.1%. Adjusted EBITDA loss improved to $5.2 million, down from $10.2 million year-over-year. Operating expenses rose to $26.9 million as the company invests in growth and R&D. The company anticipates full-year revenue between $82 million and $88 million, despite challenges due to COVID-19-related demand fluctuations. Cash reserves were reported at $93.8 million.

Positive

• Revenue growth of 69% year-over-year to $32.3 million.
• Installed base of Precision Flow systems increased by 73%.
• Gross margin improved to 53.1%, up from 48.2%.
• Adjusted EBITDA loss narrowed to $5.2 million from $10.2 million.

Negative

• Net loss of $10.4 million, although improved from $13.8 million in Q1 2020.
• Operating expenses increased to $26.9 million, reflecting higher costs.
• Expectations of a significant decrease in capital sales due to COVID-19 demand reduction.

Vapotherm, Inc. (NYSE: VAPO), (“Vapotherm” or the “Company”), a global medical technology company focused on the development and commercialization of its proprietary Vapotherm high velocity therapy^® products which are used to treat patients of all ages suffering from respiratory distress, today announced first quarter 2021 financial results.

First Quarter 2021 Summary

• Revenue for the first quarter of 2021 was $32.3 million, representing a 69% increase over the prior year period
• Worldwide installed base of Precision Flow Hi-VNI systems grew by 73% compared to the first quarter of 2020
• Gross margin was 53.1% or 490 basis points higher than gross margin of 48.2% in the first quarter of 2020

“We were pleased with our performance during the first quarter,” said Joe Army, President and CEO of Vapotherm. “We grew our worldwide Installed Base, improved our gross margin by 490 basis points, and reduced our adjusted EBITDA loss to $5.2 million. For the rest of 2021, we will focus on educating our Customers on how to use High Velocity Therapy for hypercapnic Patients experiencing respiratory distress, growing the Installed Base, and launching our next generation technology platform, HVT 2.0.”

Results for the Three Months Ended March 31, 2021

The following table reflects the Company’s net revenue for the three months ended March 31, 2021 and 2020:

		Three Months Ended March 31,
		2021								2020								Change
		(in thousands, except percentages)
		Amount				% of Revenue				Amount				% of Revenue				$				%
Revenue
Capital (product & lease revenue)		$	13,454				41.6	%		$	6,034				31.6	%		$	7,420				123.0	%
Disposables			17,156				53.1	%			12,430				65.0	%			4,726				38.0	%
Service and other			1,698				5.3	%			651				3.4	%			1,047				160.8	%
Total net revenue		$	32,308				100.0	%		$	19,115				100.0	%		$	13,193				69.0	%

Net revenue for the first quarter of 2021 was $32.3 million, a 69% increase over the first quarter of 2020. Total capital equipment revenue, including product and lease revenue, increased 123% over the first quarter of 2020. This increase was primarily due to increased demand for our Precision Flow units worldwide due to the COVID-19 pandemic and increased average selling prices of both capital and disposables in the U.S. Total disposable revenue increased 38% over the first quarter of 2020, primarily driven by an increase in the worldwide installed base of Precision Flow units and increased demand for our products to treat the respiratory distress experienced by many COVID-19 patients in international markets.

Revenue information by geography is summarized as follows:

		Three Months Ended March 31,
		2021								2020								Change
		(in thousands, except percentages)
		Amount				% of Revenue				Amount				% of Revenue				$				%
United States		$	22,069				68.3	%		$	14,341				75.0	%		$	7,728				53.9	%
International			10,239				31.7	%			4,774				25.0	%			5,465				114.5	%
Total net revenue		$	32,308				100.0	%		$	19,115				100.0	%		$	13,193				69.0	%

U.S. and International revenue growth in the first quarter of 2021 was driven by increased worldwide demand for our Precision Flow units due to COVID-19 and an increase in our disposable revenue due to an increase in our worldwide installed base of Precision Flow units and COVID-19 related demand worldwide. Revenue growth in the U.S. was also driven by an increase in average selling prices of both capital and disposables for the first quarter of 2021 compared to the first quarter of 2020.

Gross profit for the first quarter of 2021 was $17.2 million, an increase of $8.0 million over the first quarter of 2020. Gross margin was 53.1% in the first quarter of 2021 compared to 48.2% in the first quarter of 2020. The gross margin improvement was due to significantly higher revenue and production volume in comparison to the first quarter of 2020, as well as an increase in average selling prices in the U.S. on both capital and disposable sales.

Operating expenses were $26.9 million in the first quarter of 2021, an increase of $5.0 million as compared to $21.9 million in the same period last year. The increase in operating expenses was primarily due to an increase in general and administrative costs due to increased headcount, auditing and compliance costs as well as an increase in research and development expenses due to development costs of our next generation platform, HVT 2.0.

Net loss for the first quarter of 2021 was $10.4 million, or $0.40 per share, compared to $13.8 million, or $0.66 per share, in the first quarter of 2020. Net loss per share was based on 25,796,065 and 20,882,949 weighted average shares outstanding for the first quarter of 2021 and 2020, respectively.

Adjusted EBITDA was negative $5.2 million for the first quarter of 2021 as compared to negative $10.2 million for the first quarter of 2020. The reduction in Adjusted EBITDA loss was primarily due to higher revenue and gross margins.

Cash Position

Cash and cash equivalents were $93.8 million as of March 31, 2021 compared to $113.7 million as of December 31, 2020.

Fiscal 2021 Outlook

The assumptions we made related to our fiscal 2021 outlook remain the same as provided on our fourth quarter earnings call held on February 24, 2021. However, given the impact of COVID-19 in our International markets, we now expect a higher contribution of revenue from the International markets than our historical levels, especially in the second quarter of 2021.

As a reminder, the assumptions we stated in the fourth quarter earnings call were as follows. We continue to believe that, beginning in the second quarter of 2021, there will be very limited budget dollars available for capital equipment and, as a result, we expect capital sales to decrease significantly year over year given the COVID-19 driven demand we experienced in 2020. In addition, our current expectations are that vaccination efforts will be successful and will result in a declining number of COVID-19 cases and hospitalizations over the last three quarters of the year thereby reducing COVID-19 related demand for our disposables as well. Despite this, we expect that disposables will show year over year growth in the U.S due to an increased installed base and greater awareness of our ability to treat the symptoms of respiratory distress in all patients, including those who are hypercapnic. Lastly, given the significant expected year over year decrease in sales and production volumes for the last three quarters of this year, especially related to capital equipment, we expect full year gross margins to decrease year over year before improving next year to levels above 2020.

The Company continues to expect full year revenue to be between $82 million and $88 million, which represents a two-year compound annual growth rate of 33% at the mid-point of this range. We continue to expect full year gross margins of 46% to 48% and full year operating expenses of $97 million to $99 million.

Conference Call

Management will host a conference call at 4:30 p.m. Eastern Time on May 5, 2021 to discuss the results of the quarter with a question and answer session. To listen to the conference call on your telephone, please dial (833) 714-0922 for U.S. callers, or +1 (778) 560-2684 for international callers, approximately ten minutes prior to the start time and reference conference code 2178274. To listen to a live webcast, please visit the Investors section of the Vapotherm website at: http://investors.vapotherm.com/events-and-presentations/events. The webcast replay will be available on the Vapotherm website for 12 months following completion of the call. A replay of this conference call will be available by telephone through May 12, 2021 by dialing (800) 585-8367 in the U.S. or +1 (416) 621-4642 outside of the U.S. The replay access code is 2178274.

Website Information

Vapotherm routinely posts important information for investors on the Investor Relations section of its website, http://investors.vapotherm.com/. Vapotherm intends to use this website as a means of disclosing material, non-public information and for complying with Vapotherm’s disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of Vapotherm’s website, in addition to following Vapotherm’s press releases, Securities and Exchange Commission filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, Vapotherm’s website is not incorporated by reference into, and is not a part of, this document.

Non-GAAP Financial Measures

This press release includes the non-GAAP financial measures of EBITDA and Adjusted EBITDA, which differ from financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). EBITDA in this press release represents net loss less interest expense, net and depreciation and amortization. Adjusted EBITDA in this release represents EBITDA as adjusted for the impact of foreign currency loss or gain, change in fair value of contingent consideration, and stock-based compensation expense. The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures in tables accompanying this release.

These non-GAAP financial measures are presented because the Company believes they are useful indicators of its operating performance. Management uses Adjusted EBITDA principally as a measure of the Company’s operating performance and for planning purposes, including the preparation of the Company’s annual operating budget and financial projections. The Company believes this measure is useful to investors as supplemental information because it is frequently used by analysts, investors and other interested parties to evaluate companies in its industry. The Company believes Adjusted EBITDA is useful to its management and investors as a measure of comparative operating performance from period to period.

These non-GAAP financial measures and should not be considered alternatives to, or superior to, net income or loss as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP. They should not be construed to imply that the Company’s future results will be unaffected by unusual or non-recurring items. In addition, Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not reflect certain cash requirements such as tax payments, debt service requirements, capital expenditures and certain other cash costs that may recur in the future. Adjusted EBITDA contains certain other limitations, including the failure to reflect our capital expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. In evaluating Adjusted EBITDA, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of the adjustments in this presentation. The Company’s presentation of Adjusted EBITDA should not be construed to imply that its future results will be unaffected by any such adjustments. Management compensates for these limitations by primarily relying on the Company’s GAAP results in addition to using Adjusted EBITDA and other non-GAAP financial measures on a supplemental basis. The Company’s definition of Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.

About Vapotherm

Vapotherm, Inc. (NYSE: VAPO) is a publicly traded developer and manufacturer of advanced respiratory technology based in Exeter, New Hampshire, USA. The Company develops innovative, comfortable, non-invasive technologies for respiratory support of patients with chronic or acute breathing disorders. Over 2.6 million patients have been treated with the use of Vapotherm high velocity therapy® systems. For more information, visit www.vapotherm.com.

Vapotherm high velocity therapy is mask-free noninvasive ventilatory support and is a front-line tool for relieving respiratory distress—including hypercapnia, hypoxemia, and dyspnea. It allows for the fast, safe treatment of undifferentiated respiratory distress with one tool. The Precision Flow system’s mask-free interface delivers optimally conditioned breathing gases, making it comfortable for patients and reducing the risks and care complexities associated with mask therapies. While being treated, patients can talk, eat, drink and take oral medication.

Legal Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements, including statements about our future focus on and ability to ensure our installed base of Precision Flow units is productive, grow the installed base and launch our new platform technology, HVT 2.0., and our expected revenue, gross margin and operating expenses for fiscal year 2021. In some cases, you can identify forward-looking statements by terms such as ‘‘expect,’’ “continue” “will” or “typically,” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words, and the use of future dates. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statement. Applicable risks and uncertainties include, but are not limited to the following: Vapotherm has incurred losses in the past and may be unable to achieve or sustain profitability in the future, Vapotherm may need to raise additional capital to fund its existing commercial operations, develop and commercialize new products, and expand its operations, Vapotherm’s dependence on sales generated from its Precision Flow systems, competition from multi-national corporations who have significantly greater resources than Vapotherm and are more established in the respiratory market, the ability for Precision Flow systems to gain increased market acceptance, its inexperience directly marketing and selling its products, the potential loss of one or more suppliers, Vapotherm’s susceptibility to seasonal fluctuations, Vapotherm’s failure to comply with applicable United States and foreign regulatory requirements, the failure to obtain U.S. Food and Drug Administration or other regulatory authorization to market and sell future products or its inability to secure, maintain or enforce patent or other intellectual property protection for its products, the impact of the COVID-19 pandemic on its business, including its supply chain, and the other risks and uncertainties included under the heading “Risk Factors” in Vapotherm’s Annual Report on Form 10-K for the fiscal year ended December, 31, 2020, as filed with the Securities and Exchange Commission on February 24, 2021, Vapotherm’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as filed with the Securities and Exchange Commission on May 5, 2021 and in any subsequent filings with the Securities and Exchange Commission. The forward-looking statements contained in this press release reflect Vapotherm’s views as of the date hereof, and Vapotherm does not assume and specifically disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.

Financial Statements:

VAPOTHERM, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
		March 31, 2021				December 31, 2020
		(unaudited)
Assets
Current assets
Cash and cash equivalents		$	93,828			$	113,683
Accounts receivable, net			13,659				23,488
Inventories			26,935				19,873
Prepaid expenses and other current assets			6,485				5,041
Total current assets			140,907				162,085
Property and equipment, net			21,667				20,573
Operating lease right-of-use assets			7,835				8,260
Restricted cash			253				1,853
Goodwill			14,009				16,226
Intangible assets, net			5,201				5,694
Other long-term assets			1,166				967
Total assets		$	191,038			$	215,658
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		$	6,049			$	4,967
Contract liabilities			1,285				2,977
Accrued expenses and other current liabilities			19,535				34,033
Revolving loan facility, current portion			1,158				-
Total current liabilities			28,027				41,977
Long-term loans payable, net			39,671				39,653
Revolving loan facility, net of current portion			3,731				4,888
Deferred income tax liabilities			9				6
Other long-term liabilities			12,598				15,229
Total liabilities			84,036				101,753
Commitments and contingencies
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