Vapotherm Reports First Quarter 2020 Financial Results

First Quarter 2020 Revenue of $19.1 Million Reflects 55.4% Increase Over Prior Year

EXETER, N.H.--()--Vapotherm, Inc. (NYSE: VAPO), (“Vapotherm” or the “Company”), a global medical technology company focused on the development and commercialization of its proprietary Hi-VNI® Technology products that are used to treat patients of all ages suffering from respiratory distress, today announced first quarter 2020 financial results.

First Quarter 2020 Summary

  • Revenue for the first quarter of 2020 was $19.1 million, representing a 55.4% increase over the prior year period
  • Worldwide installed base of Precision Flow Hi-VNI systems grew by 22.7% compared to the first quarter of 2019
  • Gross margin was 48.2% or 610 basis points higher than gross margin of 42.1% in the first quarter of 2019

Second Quarter 2020 Update

  • Preliminary unaudited revenue for the month ended April 30, 2020 is estimated to be between $19.0 million and $19.3 million
  • Worldwide installed base of Precision Flow Hi-VNI systems grew by over 2,200 for the month ended April 30, 2020 compared to nearly 1,300 during the entire first quarter of 2020

We believe the first quarter of 2020 was transformational for Vapotherm as significant customer demand in both new and existing accounts due to COVID-19 materially increased the awareness of our Hi-VNI Technology for treating patients suffering from respiratory distress. In the first quarter, we significantly exceeded expectations for revenue, continued the rapid expansion of our worldwide installed base of Precision Flow systems, and improved our gross margin by 610 basis points over the prior year period despite strong head winds. I am especially proud of the effort of our operations team and suppliers as we dramatically increased production capacity to meet increased demand,” said Joe Army, President and CEO of Vapotherm. “The second quarter is off to a very strong start as we continue to see increased demand from our new and existing customers treating the respiratory distress experienced by many COVID-19 patients, allowing us to significantly increase our worldwide installed base. We intend to focus on managing our supply chain to support our increased production levels along with continuing to improve our gross margin and expanding our limited market release of the Oxygen Assist Module in the U.K. and potentially in certain European markets.”

Results for the Three Months Ended March 31, 2020

The following table reflects the Company’s revenue for the three months ended March 31, 2020 and 2019:

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

 

2020

 

2019

 

Change

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

(in thousands, except percentages)

 

 

 

 

 

 

 

 

 

 

Amount

 

 

% of Revenue

 

Amount

 

 

% of Revenue

 

 

$

 

 

%

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Equipment (product & lease revenue)

 

$

6,034

 

 

 

31.6

%

 

$

2,678

 

 

 

21.8

%

 

$

3,356

 

 

 

125.3

%

Disposable

 

 

12,430

 

 

 

65.0

%

 

 

9,019

 

 

 

73.3

%

 

 

3,411

 

 

 

37.8

%

Service and Other

 

 

651

 

 

 

3.4

%

 

 

602

 

 

 

4.9

%

 

 

49

 

 

 

8.1

%

Total Revenue

 

$

19,115

 

 

 

100.0

%

 

$

12,299

 

 

 

100.0

%

 

$

6,816

 

 

 

55.4

%

Revenue for the first quarter of 2020 was $19.1 million, a 55.4% increase over the first quarter of 2019, and in line with preliminary first quarter revenue of $18.9 million as announced on April 13, 2020. Total capital revenue, including both product sales, lease revenue, and other lease revenue increased 125.3% over the first quarter of 2019. This increase was primarily as a result of increased sales and leases of our Precision Flow units. Total disposable revenue increased 37.8% year over year, primarily driven by an increase in the worldwide installed base of Precision Flow units and increased utilization to treat the respiratory distress experienced by many COVID-19 patients.

Revenue information by geography is summarized as follows:

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

 

2020

 

2019

 

Change

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

(in thousands, except percentages)

 

 

 

 

 

 

 

 

 

 

Amount

 

 

% of Revenue

 

 

Amount

 

 

% of Revenue

 

$

 

 

%

 

United States

 

$

14,341

 

 

 

75.0

%

 

$

10,049

 

 

 

81.7

%

 

$

4,292

 

 

 

42.7

%

International

 

 

4,774

 

 

 

25.0

%

 

 

2,250

 

 

 

18.3

%

 

 

2,524

 

 

 

112.2

%

Total Revenue

 

$

19,115

 

 

 

100.0

%

 

$

12,299

 

 

 

100.0

%

 

$

6,816

 

 

 

55.4

%

U.S. and International revenue growth in the first quarter of 2020 was driven by an increase in single-use disposable sales due to higher installed bases of Precision Flow units and increased utilization to treat the respiratory distress experienced by many COVID-19 patients, as well as an increase in the number of Precision Flow units sold year over year.

Gross profit for the first quarter of 2020 was $9.2 million, an increase of $4.0 million over the first quarter of 2019. Gross margin was 48.2% in the first quarter of 2020 compared to 42.1% in the first quarter of 2019. Gross margin was positively impacted by improved overhead absorption as production capacity increased, higher U.S. disposable average selling prices and higher International capital average selling prices. Partially offsetting these positive factors were strong headwinds, including higher labor costs and increased supplier freight and expediting fees to meet the rapid increase in production capacity, and to a lesser extent a higher mix of capital equipment revenue and a higher mix of International revenue.

Operating expenses were $21.9 million in the first quarter of 2020, an increase of $4.6 million as compared to $17.3 million in the same period last year. The increase in operating expenses was primarily a result of higher sales and marketing expenses due to increased sales commissions as a result of increased revenue and increased headcount, as well as higher general and administrative expenses.

Net loss for the first quarter of 2020 was $13.8 million, or $0.66 per share, compared to $13.0 million, or $0.76 per share, in the first quarter of 2019. Net loss per share was based on 20,882,949 and 16,949,027 weighted average shares outstanding for the first quarter of 2020 and 2019, respectively.

Adjusted EBITDA was ($10.2) million for the first quarter of 2020 as compared to ($9.6) million for the first quarter of 2019. The $0.5 million increase in Adjusted EBITDA loss in the first quarter of 2020 was primarily due to higher operating expenses resulting from higher levels of sales and marketing expenses, primarily sales commissions and increased headcount, and general and administrative expenses, partially offset by higher gross profit.

Cash Position

Cash and cash equivalents were $60.4 million as of March 31, 2020 compared to $71.7 million as of December 31, 2019.

Subsequent to March 31, 2020, the Company has raised gross proceeds of $10.2 million, or $9.9 million net of commissions, through its At-The-Market facility.

Fiscal 2020 Outlook

As announced on April 13, 2020, Vapotherm has withdrawn its previously provided annual guidance for 2020 due to the inability to estimate the scope, duration, and impact of the COVID-19 pandemic and the full year effect on the Company’s operations and financial results. Vapotherm will continue to evaluate the impact of the COVID-19 pandemic on its operations and financial results and will provide additional information, to the extent practicable, during its next earnings release.

The preliminary financial information for the month ended April 30, 2020 presented in this press release is based on Vapotherm’s current expectations and may be adjusted as a result of, among other things, completion of customary quarterly review procedures.

Conference Call

Management will host a conference call at 4:30 p.m. Eastern Time on May 5, 2020 to discuss the results of the quarter and the year with a question and answer session. To listen to the conference call on your telephone, please dial (877) 201-0168 for U.S. callers, or (647) 788-4901 for international callers, approximately ten minutes prior to the start time and reference conference code 4593734. 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 90 days following completion of the call. A replay of this conference call will be available by telephone through May 12, 2020 by dialing (800) 585-8367 in the U.S. or (416) 621-4642 outside of the U.S. The replay access code is 4593734.

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 measure 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, 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.

Adjusted EBITDA is presented because the Company believes it is a useful indicator of its operating performance. Management uses the measure 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.

Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative 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. It should not be construed to imply that the Company’s future results will be unaffected by unusual or non-recurring items. In addition, the measure 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 contain 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 on a supplemental basis. The Company’s definition of this measure is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.

About Vapotherm

Vapotherm, Inc. 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 2.2 million patients have been treated with Vapotherm Hi-VNI Technology. Hi-VNI Technology is mask-free noninvasive ventilatory support for spontaneously breathing patients 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. Hi-VNI Technology’s mask-free interface delivers optimally conditioned breathing gases, making it comfortable for patients and reducing the risks associated with mask therapies. While being treated, patients can talk, eat, drink and take oral medication. For more information, visit www.vapotherm.com.

Legal Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements, including statements about our ability to meet increased demand from our customers during the COVID-19 pandemic, our ability to manage our supply chain during the COVID-19 pandemic, increasing our installed base, commercializing our Oxygen Assist Module and improving our gross margins. In some cases, you can identify forward-looking statements by terms such as ‘‘expect,’’ “guide” or “typically” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. 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 and maintain 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, 2019, as filed with the Securities and Exchange Commission on March 4, 2020, Vapotherm’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 13, 2020, Vapotherm’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as filed with the Securities and Exchange Commission on May 5, 2020 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, 2020

 

 

December 31, 2019

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

60,393

 

 

$

71,655

 

Accounts receivable, net

 

 

11,948

 

 

 

8,243

 

Inventories

 

 

9,103

 

 

 

9,137

 

Prepaid expenses and other current assets

 

 

4,021

 

 

 

4,066

 

Total current assets

 

 

85,465

 

 

 

93,101

 

Property and equipment, net

 

 

15,696

 

 

 

15,086

 

Restricted cash

 

 

1,852

 

 

 

1,852

 

Goodwill

 

 

549

 

 

 

588

 

Intangible assets, net

 

 

303

 

 

 

353

 

Deferred income tax assets

 

 

63

 

 

 

66

 

Other long-term assets

 

 

856

 

 

 

844

 

Total assets

 

$

104,784

 

 

$

111,890

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,614

 

 

$

3,375

 

Contract liabilities

 

 

175

 

 

 

137

 

Accrued expenses and other current liabilities

 

 

12,152

 

 

 

9,187

 

Short-term line of credit

 

 

4,489

 

 

 

3,491

 

Total current liabilities

 

 

21,430

 

 

 

16,190

 

Long-term loans payable, net

 

 

41,858

 

 

 

41,787

 

Other long-term liabilities

 

 

127

 

 

 

174

 

Total liabilities

 

 

63,415

 

 

 

58,151

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock ($0.001 par value) 25,000,000 shares authorized; no shares issued

and outstanding as of March 31, 2020 and December 31, 2019

 

 

-

 

 

 

-

 

Common stock ($0.001 par value) 175,000,000 shares authorized as of

March 31, 2020 and December 31, 2019, 20,917,149 and 20,851,531

shares issued and outstanding as of March 31, 2020 and

December 31, 2019, respectively

 

 

21

 

 

 

21

 

Additional paid-in capital

 

 

320,660

 

 

 

319,115

 

Accumulated other comprehensive income (loss)

 

 

(27

)

 

 

44

 

Accumulated deficit

 

 

(279,285

)

 

 

(265,441

)

Total stockholders' equity

 

 

41,369

 

 

 

53,739

 

Total liabilities and stockholders’ equity

 

$

104,784

 

 

$

111,890

 

Vapotherm, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Net revenue

 

$

19,115

 

 

$

12,299

 

Cost of revenue

 

 

9,898

 

 

 

7,120

 

Gross profit

 

 

9,217

 

 

 

5,179

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

3,362

 

 

 

3,273

 

Sales and marketing

 

 

13,317

 

 

 

9,161

 

General and administrative

 

 

5,251

 

 

 

4,879

 

Total operating expenses

 

 

21,930

 

 

 

17,313

 

Loss from operations

 

 

(12,713

)

 

 

(12,134

)

Other (expense) income

 

 

 

 

 

 

 

 

Foreign currency gain (loss)

 

 

24

 

 

 

(9

)

Interest income

 

 

125

 

 

 

203

 

Interest expense

 

 

(1,295

)

 

 

(1,024

)

Other

 

 

15

 

 

 

-

 

Net loss

 

$

(13,844

)

 

$

(12,964

)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(71

)

 

 

-

 

Total other comprehensive loss

 

$

(71

)

 

$

-

 

Total comprehensive loss

 

$

(13,915

)

 

$

(12,964

)

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders - basic and diluted

 

$

(0.66

)

 

$

(0.76

)

Weighted-average number of shares used in calculating net

loss per share, basic and diluted

 

 

20,882,949

 

 

 

16,949,027

 

VAPOTHERM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(13,844

)

 

$

(12,964

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

1,447

 

 

 

1,903

 

Depreciation and amortization

 

 

1,097

 

 

 

621

 

Provision for bad debts

 

 

101

 

 

 

13

 

Provision for inventories

 

 

23

 

 

 

2

 

Loss on disposal of property and equipment

 

 

3

 

 

 

23

 

Amortization of discount on debt

 

 

63

 

 

 

44

 

Changes in operating assets and liabilities, net of acquisition:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(3,875

)

 

 

847

 

Inventories

 

 

(12

)

 

 

1,780

 

Prepaid expenses and other assets

 

 

33

 

 

 

197

 

Accounts payable

 

 

1,310

 

 

 

(1,094

)

Contract liabilities

 

 

38

 

 

 

22

 

Accrued expenses and other current liabilities

 

 

2,894

 

 

 

(1,225

)

Net cash used in operating activities

 

 

(10,722

)

 

 

(9,831

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,558

)

 

 

(1,128

)

Acquisition of business, net of cash acquired

 

 

-

 

 

 

(1,560

)

Net cash used in investing activities

 

 

(1,558

)

 

 

(2,688

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Short-term line of credit

 

 

995

 

 

 

837

 

Proceeds from exercise of stock options

 

 

40

 

 

 

-

 

Proceeds on loans

 

 

-

 

 

 

10,500

 

Debt issuance costs

 

 

-

 

 

 

(322

)

Net cash provided by financing activities

 

 

1,035

 

 

 

11,015

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(17

)

 

 

-

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(11,262

)

 

 

(1,504

)

Cash, cash equivalents and restricted cash

 

 

 

 

 

 

 

 

Beginning of period

 

 

73,507

 

 

 

60,022

 

End of period

 

$

62,245

 

 

$

58,518

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

 

Interest paid during the period

 

$

1,202

 

 

$

939

 

Property and equipment purchases in accounts payable and accrued expenses

 

$

36

 

 

$

42

 

Issuance of warrants in conjunction with debt draw down

 

$

-

 

 

$

293

 

Non-GAAP Financial Measures

The following tables contain a reconciliation of net loss to Adjusted EBITDA for the three ended March 31, 2020 and 2019, respectively.

 

 

Three Months Ended March 31,

 

 

Amount

 

 

 

 

2020

 

 

2019

 

 

 

 

(unaudited)

 

 

 

 

(in thousands)

 

 

Net loss

 

$

(13,844

)

 

$

(12,964

)

 

Interest expense, net

 

 

1,170

 

 

 

821

 

 

Depreciation and amortization

 

 

1,097

 

 

 

621

 

 

EBITDA

 

$

(11,577

)

 

$

(11,522

)

 

Foreign currency

 

 

(24

)

 

 

9

 

 

Stock-based compensation

 

 

1,447

 

 

 

1,903

 

 

Adjusted EBITDA

 

$

(10,154

)

 

$

(9,610

)

 

Supplemental Operating Metrics

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

Amount

 

 

Amount

 

 

Amount

 

 

%

 

Precision Flow Units Installed Base

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

12,715

 

 

 

10,713

 

 

 

2,002

 

 

 

18.7

%

International

 

5,153

 

 

 

3,846

 

 

 

1,307

 

 

 

34.0

%

Total

 

17,868

 

 

 

14,559

 

 

 

3,309

 

 

 

22.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Precision Flow Units Sold and Leased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

623

 

 

 

324

 

 

 

299

 

 

 

92.3

%

International

 

419

 

 

 

141

 

 

 

278

 

 

 

197.2

%

Total

 

1,042

 

 

 

465

 

 

 

577

 

 

 

124.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disposable Patient Circuits Sold

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

92,591

 

 

 

71,376

 

 

 

21,215

 

 

 

29.7

%

International

 

33,900

 

 

 

17,301

 

 

 

16,599

 

 

 

95.9

%

Total

 

126,491

 

 

 

88,677

 

 

 

37,814

 

 

 

42.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contacts

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

Contacts

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