Vapotherm Reports Third Quarter 2021 Financial Results

Rhea-AI Summary

Vapotherm (NYSE: VAPO) reported third quarter 2021 revenue of $38.1 million, up 24.7% from Q3 2020, driven by a 66.2% increase in disposables revenue to $21.7 million. Despite increased demand linked to COVID-19, net loss widened to $13.6 million, or $0.52 per share. Operating expenses rose to $31.7 million, partly due to higher sales commissions. The company raised its fiscal 2021 revenue guidance to over $106 million, a 120% increase since 2019, while anticipating gross margins of 47% to 49%.

Positive

• Disposables revenue up 66.2% driven by higher volume.
• Total revenue increased by 24.7%, reaching $38.1 million.
• Fiscal 2021 revenue guidance raised to over $106 million, a 120% increase from 2019.

Negative

• Net loss increased to $13.6 million from $12.4 million year-over-year.
• Operating expenses rose to $31.7 million, impacting profitability.

Disposables revenue increased 66.2% over the third quarter of 2020

EXETER, N.H.--(BUSINESS WIRE)-- Vapotherm, Inc. (NYSE: VAPO), (“Vapotherm” or the “Company”), a global medical technology company, today announced third quarter 2021 financial results.

Third Quarter 2021 Summary

• Total revenue for the third quarter of 2021 was $38.1 million, an increase of 24.7% over the third quarter of 2020
• Disposables revenue for the third quarter of 2021 of $21.7 million, an increase of 66.2% over the third quarter of 2020
• Worldwide installed base of Precision Flow Hi-VNI systems increased by over 2,500 units in the third quarter of 2021

“I am very pleased with Vapotherm’s performance in the third quarter. Demand for our technology surged, resulting in one of the strongest quarters in the company’s history, including record disposable revenue,” said Joseph Army, the company’s President and CEO. “Despite the labor and supply chain issues which affected the economy in general, our team found a way to satisfy customer demand during this latest COVID-19 surge and significantly expand our Installed Base. As proud as I am of our financial performance, I’m even prouder of the heroic efforts our team made to meet customer demand. The customer loyalty this generated, combined with our large Installed Base, leaves us well positioned in the respiratory care market at a time when many believe COVID-19 and its mutations will become a chronic, recurring problem likely to expand the total addressable market significantly. I’d like to acknowledge and thank the clinicians on the front-lines of this pandemic for their tireless work in supporting their Patients,” Mr. Army concluded.

Results for the Three Months September 30, 2021

The following table reflects the Company’s net revenue for the three months ended September 30, 2021 and 2020:

		Three Months Ended September 30,
		2021								2020								Change
		(in thousands, except percentages)
		Amount				% of Revenue				Amount				% of Revenue				$				%
Revenue
Capital (product & lease revenue)		$	15,113				39.7	%		$	16,898				55.3	%		$	(1,785	)			-10.6	%
Disposables			21,674				56.8	%			13,044				42.7	%			8,630				66.2	%
Service and other			1,328				3.5	%			617				2.0	%			711				115.2	%
Total net revenue		$	38,115				100.0	%		$	30,559				100.0	%		$	7,556				24.7	%

Net revenue for the third quarter of 2021 was $38.1 million. Disposables revenue increased in the third quarter of 2021 primarily driven by higher volume in the United States due to a surge of the COVID-19 pandemic in the United States and a much larger installed base of Precision Flow units, and to a lesser extent, an increase in average selling prices. Capital equipment revenue decreased in the third quarter of 2021 primarily due to decreased sales of our Precision Flow units in the United States.

Revenue information by geography is summarized as follows:

		Three Months Ended September 30,
		2021								2020								Change
		(in thousands, except percentages)
		Amount				% of Revenue				Amount				% of Revenue				$				%
United States		$	32,950				86.4	%		$	25,526				83.5	%		$	7,424				29.1	%
International			5,165				13.6	%			5,033				16.5	%			132				2.6	%
Total net revenue		$	38,115				100.0	%		$	30,559				100.0	%		$	7,556				24.7	%

United States revenue increased due to a surge of the COVID-19 pandemic and a much larger installed base of Precision Flow units which increased the volume of disposables sold period over period. International net revenue was relatively consistent during the third quarter of 2021 compared to the third quarter of 2020.

Gross profit and gross margin for the third quarter of 2021 was $18.8 million and 49.4%, respectively. In the third quarter of 2021, gross margin was negatively impacted by one-time charges related to the transfer of certain activities to our contract manufacturer in Mexico, partially offset by increased labor and overhead absorption due to higher disposable volumes and a greater percentage of total revenue coming from the United States.

Operating expenses were $31.7 million in the third quarter of 2021, an increase of $5.0 million as compared to the same period last year. The increase was primarily due to increased sales commissions, employee-related expenses, stock-based compensation, travel expenses, and increased spend on marketing materials.

Net loss for the third quarter of 2021 was $13.6 million, or $0.52 per share, compared to $12.4 million, or $0.49 per share, in the third quarter of 2020. Net loss per share was based on 25,987,648 and 25,578,328 weighted average shares outstanding for the third quarter of 2021 and 2020, respectively.

Adjusted EBITDA was negative $10.7 million for the third quarter of 2021 as compared to negative $8.2 million for the third quarter of 2020. The increase in Adjusted EBITDA loss was primarily due to an increase in operating expenses and a decrease in gross margin on a year over year basis.

Cash Position

Cash and cash equivalents were $70.3 million as of September 30, 2021, $81.5 million as of June 30, 2021 and $113.7 million as of December 31, 2020.

Fiscal 2021 Outlook

The Company now expects full year revenue to be greater than $106 million, which represents an increase of $4 million over the Company’s updated guidance of $102 million provided on September 8, 2021. This represents an increase of 120% over 2019 revenue and a two-year compounded annual growth rate of 48%. It continues to be difficult to predict the timing, duration and impact of COVID-19 on hospitalizations around the world and, to the extent the impact of COVID-19 deviates from the Company’s expectations, its full year revenue forecast would be impacted.

Given the expected year over year decrease in revenue and production volumes the Company expects full year gross margins to decrease year over year before improving in 2022 to levels above 2020 levels. The Company now expects full year gross margins of 47% to 49% in 2021, an increase from the previously provided guidance of 46% to 48%.

The Company now expects full year operating expenses of at least $106 million. The increase in full year operating expense guidance is due primarily to higher selling expenses due to increased revenue and investments in its new digital business, Vapotherm Access.

Conference Call

Management will host a conference call at 4:30 p.m. Eastern Time on November 3, 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 (888) 330-2022 for U.S. callers, or +1 (646) 960-0690 for international callers, approximately ten minutes prior to the start time and reference conference code 6585549. 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 November 12, 2021 by dialing (800) 770-2030 in the U.S. or +1 (647) 362-9199 outside of the U.S. The replay access code is 6585549.

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 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 3.2 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 the Company’s plan to grow its Installed Base, add additional production capacity in Mexico, and its 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,” “plan,” “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 or achieve its 2021 financial guidance; 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; Vapotherm’s inexperience directly marketing and selling its products; the potential loss of one or more suppliers and dependence on its new third party manufacturer; 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 and Vapotherm’s most recent Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 as filed with the Securities and Exchange Commission on November 3 ,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)
		September 30,				December 31,
		2021				2020
		(unaudited)
Assets
Current assets
Cash and cash equivalents		$	70,335			$	113,683
Accounts receivable, net			20,812				23,488
Inventories			24,730				19,873
Prepaid expenses and other current assets			5,924				5,041
Total current assets			121,801				162,085
Property and equipment, net			21,727				20,573
Operating lease right-of-use assets			6,956				8,260
Restricted cash			253				1,853
Goodwill			13,996				16,226
Intangible assets, net			4,877				5,694
Other long-term assets			1,201				967
Total assets		$	170,811			$	215,658
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		$	4,143			$	4,967
Contract liabilities			2,190				2,977
Accrued expenses and other current liabilities			28,830				34,033
Total current liabilities			35,163				41,977
Long-term loans payable, net			39,707				39,653
Revolving loan facility			1,726				4,888
Deferred income tax liabilities			8				6
Other long-term liabilities			11,978				15,229
Total liabilities			88,582				101,753
Commitments and contingencies
Stockholders' equity
Preferred stock ($0.001 par value) 25,000,000 shares authorized; no shares issued and outstanding as of September 30, 2021 and December 31, 2020			-				-
Common stock ($0.001 par value) 175,000,000 shares authorized as of September 30, 2021 and December 31, 2020, 26,043,578 and 25,722,984 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively			26				26
Additional paid-in capital			440,367				430,781
Accumulated other comprehensive income			19				41
Accumulated deficit			(358,183	)			(316,943	)
Total stockholders' equity			82,229				113,905
Total liabilities and stockholders’ equity		$	170,811			$	215,658

Vapotherm, Inc. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share amounts)
		Three Months Ended September 30,							Nine Months Ended September 30,
		2021				2020			2021				2020
Net revenue		$	38,115			$	30,559		$	91,048			$	84,826
Cost of revenue			19,291				15,049			45,649				42,491
Gross profit			18,824				15,510			45,399				42,335
Operating expenses
Research and development			3,979				4,745			13,466				12,002
Sales and marketing			20,465				15,932			47,169				44,107
General and administrative			7,262				6,047			23,948				16,925
Total operating expenses			31,706				26,724			84,583				73,034
Loss from operations			(12,882	)			(11,214	)		(39,184	)			(30,699	)
Other (expense) income
Foreign currency gain (loss)			(58	)			38			(188	)			37
Interest income			21				42			74				227
Interest expense			(647	)			(1,308	)		(1,960	)			(3,898	)
Other			-				-			18				15
Net loss		$	(13,566	)		$	(12,442	)	$	(41,240	)		$	(34,318	)
Other comprehensive income (loss):
Foreign currency translation adjustments			(40	)			34			(22	)			(41	)
Total other comprehensive income (loss)		$	(40	)		$	34		$	(22	)		$	(41	)
Total comprehensive loss		$	(13,606	)		$	(12,408	)	$	(41,262	)		$	(34,359	)
Net loss per share - basic and diluted		$	(0.52	)		$	(0.49	)	$	(1.59	)		$	(1.48	)
Weighted-average number of shares used in calculating net loss per share, basic and diluted			25,987,648				25,578,328			25,891,045				23,192,703

VAPOTHERM, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
		Nine Months Ended September 30,
		2021				2020
Cash flows from operating activities
Net loss		$	(41,240	)		$	(34,318	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense			7,197				4,580
Depreciation and amortization			4,181				3,371
Provision for bad debts			(110	)			251
Provision for inventory valuation			(285	)			(428	)
Non-cash lease expense			1,304				797
Change in fair value of contingent consideration			(457	)			-
Loss on disposal of property and equipment			126				13
Amortization of discount on debt			55				190
Deferred income taxes			12				-
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable			2,776				(2,916	)
Inventories			(4,576	)			(15,468	)
Prepaid expenses and other assets			(1,102	)			(1,039	)
Accounts payable			(854	)			2,803
Contract liabilities			(658	)			332
Accrued expenses and other current liabilities			(4,286	)			10,520
Operating lease liabilities, current and long-term			(1,305	)			(797	)
Net cash used in operating activities			(39,222	)			(32,109	)
Cash flows from investing activities
Purchases of property and equipment			(4,814	)			(5,944	)
Net cash used in investing activities			(4,814	)			(5,944	)
Cash flows from financing activities
Proceeds from short-term line of credit			-				995
Payments on short-term line of credit			(3,163	)			-
Proceeds from exercise of stock options			1,405				485
Proceeds from issuance of common stock in connection with public offering			-				94,155
Proceeds from issuance of common stock in connection with at-the-market offering			-				9,927
Proceeds from issuance of common stock under Employee Stock Purchase Plan			851				360
Common stock offering costs			-				(471	)
Net cash provided by (used in) financing activities			(907	)			105,451
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(5	)			(37	)
Net increase (decrease) in cash, cash equivalents and restricted cash			(44,948	)			67,361
Cash, cash equivalents and restricted cash
Beginning of period			115,536				73,507
End of period		$	70,588			$	140,868
Supplemental disclosures of cash flow information
Interest paid during the period		$	1,862			$	3,670
Property and equipment purchases in accounts payable and accrued expenses		$	133			$	139
Issuance of common stock upon vesting of restricted stock units		$	133			$	162

Non-GAAP Financial Measures The following tables contain a reconciliation of net loss to Adjusted EBITDA for the three months ended September 30, 2021 and 2020, respectively. (unaudited)
		Three Months Ended September 30,
		2021				2020
		(in thousands)
Net loss		$	(13,566	)		$	(12,442	)
Interest expense, net			626				1,266
Depreciation and amortization			1,318				1,223
EBITDA		$	(11,622	)		$	(9,953	)
Foreign currency			58				(38	)
Change in fair value of contingent consideration			(1,220	)			-
Stock-based compensation			2,079				1,756
Adjusted EBITDA		$	(10,705	)		$	(8,235	)

Supplemental Operating Metrics

	September 30,
	2021				2020				Change
	Amount				Amount				Amount				%
Precision Flow Units Installed Base
United States		22,911				17,401				5,510				31.7	%
International		11,623				7,401				4,222				57.0	%
Total		34,534				24,802				9,732				39.2	%
	Three Months Ended September 30,
	2021				2020				Change
	Amount				Amount				Amount				%
Precision Flow Units Sold and Leased
United States		1,891				2,121				(230	)			-10.8	%
International		556				549				7				1.3	%
Total		2,447				2,670				(223	)			-8.4	%
Disposable Patient Circuits Sold
United States		168,471				94,595				73,876				78.1	%
International		31,501				34,360				(2,859	)			-8.3	%
Total		199,972				128,955				71,017				55.1	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211103005937/en/

Investor Relations Contacts:

Mark Klausner or Mike Vallie, Westwicke, an ICR Company, ir@vtherm.com, +1 (603) 658-0011

Source: Vapotherm, Inc.

FAQ

What were Vapotherm's financial results for Q3 2021?

Vapotherm reported $38.1 million in total revenue for Q3 2021, a 24.7% increase from Q3 2020.

How much did Vapotherm's disposables revenue increase in Q3 2021?

Disposables revenue rose by 66.2% to $21.7 million in Q3 2021.

What is Vapotherm's guidance for full year 2021 revenue?

Vapotherm expects full year revenue to exceed $106 million, representing a 120% increase over 2019 revenue.

What was Vapotherm's net loss in Q3 2021?

Vapotherm's net loss for Q3 2021 was $13.6 million, or $0.52 per share.

How are Vapotherm's operating expenses trending?

Operating expenses increased to $31.7 million in Q3 2021, up from the previous year.