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Vapotherm Reports Third Quarter 2019 Financial Results

11/05/2019

EXETER, N.H.--(BUSINESS WIRE)-- Vapotherm, Inc. (NYSE: VAPO), 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 its financial and operating results for the third quarter ended September 30, 2019.

Third Quarter 2019 Highlights

  • Revenue for the third quarter of 2019 was $10.8 million, a 15.1% increase over the prior year period.
  • Worldwide installed base of Precision Flow units grew by 18.5% compared to the third quarter of 2018.
  • Disposable revenue increased 24.3% compared to the third quarter of 2018.
  • Gross margin was 44.5% compared to 38.5% in the third quarter of 2018.

“Our performance during the third quarter was highlighted by 24% worldwide disposable revenue growth and significant gross margin expansion. Despite generally positive trends in the business, revenue came in below our expectations as a result of lower U.S. capital revenue,” said Joe Army, President and CEO of Vapotherm. “For the remainder of 2019, we are focused on continuing to expand our installed base, driving disposable revenue growth and preparing for the launch of new products.”

Results for the Three Months Ended September 30, 2019

The following table reflects the Company’s net revenue for the three months ended September 30, 2019 and 2018:

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

2018

 

 

Change

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except percentages)

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

% of Revenue

 

 

Amount

 

 

% of Revenue

 

 

$

 

 

%

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital (product & lease revenue)

 

$

2,518

 

 

 

23.3

%

 

$

2,707

 

 

 

28.8

%

 

$

(189

)

 

 

-7.0

%

Disposable

 

 

7,827

 

 

 

72.4

%

 

 

6,297

 

 

 

67.1

%

 

 

1,530

 

 

 

24.3

%

Service and Other

 

 

464

 

 

 

4.3

%

 

 

385

 

 

 

4.1

%

 

 

79

 

 

 

20.5

%

Total Revenue

 

$

10,809

 

 

 

100.0

%

 

$

9,389

 

 

 

100.0

%

 

$

1,420

 

 

 

15.1

%

Revenue for the third quarter of 2019 was $10.8 million, a 15.1% increase over the third quarter of 2018. Total capital revenue, including both product sales and lease revenue, decreased 7.0% over the third quarter of 2018 primarily as a result of fewer sales and leases of our Precision Flow units and lower average selling prices in the U.S. Total disposable revenue increased 24.3% year over year, primarily driven by an increase in the worldwide installed base of Precision Flow units, increased average selling prices worldwide and, to a lesser extent, higher utilization rates in our International markets. Disposable revenue as a percentage of total revenue for the third quarter of 2019 and 2018 was 72.4% and 67.1%, respectively.

Revenue information by geography is summarized as follows:

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

2018

 

 

Change

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except percentages)

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

% of Revenue

 

 

Amount

 

 

% of Revenue

 

 

$

 

 

%

 

United States

 

$

8,035

 

 

 

74.3

%

 

$

7,537

 

 

 

80.3

%

 

$

498

 

 

 

6.6

%

International

 

 

2,774

 

 

 

25.7

%

 

 

1,852

 

 

 

19.7

%

 

 

922

 

 

 

49.8

%

Total Revenue

 

$

10,809

 

 

 

100.0

%

 

$

9,389

 

 

 

100.0

%

 

$

1,420

 

 

 

15.1

%

U.S. revenue growth in the third quarter of 2019 was driven by an increase in disposable sales due to a higher installed base of Precision Flow units and higher average selling prices, partially offset by fewer sales and leases of our Precision Flow units and lower average selling prices. International revenue growth in the third quarter was primarily driven by an increase in disposable sales due to a higher installed base of Precision Flow units, higher average selling prices and higher utilization rates and, to a lesser extent, increases in service and other revenue from our U.K. business.

Our total installed base of Precision Flow units at the end of the third quarter of 2019 was 15,813 units, comprised of 11,475 and 4,338 units in the U.S. and International markets, respectively. This represents a 18.5% increase over our installed base at the end of the third quarter of 2018. We sold and leased 316 and 162 Precision Flow units in the U.S. and International markets, respectively, in the third quarter of 2019. In the third quarter of 2019, we sold 56,231 and 22,943 disposables in the U.S. and International markets, respectively.

Gross profit for the third quarter of 2019 was $4.8 million, an increase of $1.2 million over the third quarter of 2018. Gross margin was 44.5% in the third quarter of 2019 compared to 38.5% in the third quarter of 2018. The increase in gross margin was driven by a decrease in disposable component costs in comparison to the third quarter of 2018, reduced overhead rates per unit, a favorable sales mix of disposables and increased average selling prices.

Operating expenses were $16.5 million in the third quarter of 2019, an increase of $4.1 million as compared to $12.3 million in the same period last year. The increase in operating expenses was primarily a result of increased headcount and employee-related expenses, product development costs, legal and consulting fees, public company related expenses and increased investments in sales and marketing initiatives.

Net loss for the third quarter of 2019 was $12.8 million, or $0.65 per share, compared to $9.5 million, or $10.90 per share, in the third quarter of 2018. Net loss per share was based on 19,531,153 and 875,453 weighted average shares outstanding for the third quarter of 2019 and 2018, respectively.

Adjusted EBITDA was ($10.7) million for the third quarter of 2019 as compared to ($8.0) million for the third quarter of 2018. The $2.7 million increase in Adjusted EBITDA loss in the third quarter of 2019 was primarily due to higher operating expenses, partially offset by higher gross profit.

Cash Position

Cash and cash equivalents were $83.5 million as of September 30, 2019 compared to $58.2 million as of December 31, 2018 and $46.1 million as of June 30, 2019. During the quarter, the Company completed a public offering of its common stock, raising net proceeds of $48.3 million.

Fiscal 2019 Outlook

For fiscal 2019, we expect revenue to be between $47.1 million and $47.6 million, which represents a year-over-year increase of 11% to 12%, a decrease from our prior guidance of $49.0 million and $51.0 million due to lower U.S. capital revenue expectations.

In the fourth quarter of 2019, we expect revenue in the range of $12.0 million to $12.5 million, an anticipated year-over-year increase of between 3% to 7%.

For fiscal 2019, we expect gross margin to be in the range of 43% to 44%, an increase from our prior guidance of 42.5% to 43.5%.

For fiscal 2019, we expect operating expenses to be in the range of $68.0 million to $70.0 million.

Conference Call

Management will host a conference call at 4:30 p.m. Eastern Time on November 5, 2019 to discuss the results of the quarter 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 start time and reference conference code 1579489. 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 the completion of the call. A replay of this conference call will be available over the phone through November 12, 2019 by dialing (800) 585-8367 in the U.S. or (416) 621-4642 outside of the U.S. The replay access code is 1579489.

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, the change in fair value of warrant liabilities, 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 2.0 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 made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about the expansion of our installed base, driving disposable revenue growth, the potential launch of new products and full year or quarterly revenue, gross margin, and operating expense guidance. 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 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, 2018, as filed with the Securities and Exchange Commission on March 22, 2019, 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.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net revenue

 

$

10,809

 

 

$

9,389

 

 

$

35,094

 

 

$

30,691

 

Cost of goods sold

 

 

5,999

 

 

 

5,775

 

 

 

19,646

 

 

 

18,737

 

Gross profit

 

 

4,810

 

 

 

3,614

 

 

 

15,448

 

 

 

11,954

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

3,280

 

 

 

1,766

 

 

 

9,720

 

 

 

6,074

 

Sales and marketing

 

 

9,193

 

 

 

7,757

 

 

 

27,786

 

 

 

24,331

 

General and administrative

 

 

3,978

 

 

 

2,804

 

 

 

13,389

 

 

 

7,789

 

Loss on disposal of property and equipment

 

 

-

 

 

 

17

 

 

 

-

 

 

 

59

 

Total operating expenses

 

 

16,451

 

 

 

12,344

 

 

 

50,895

 

 

 

38,253

 

Loss from operations

 

 

(11,641

)

 

 

(8,730

)

 

 

(35,447

)

 

 

(26,299

)

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency loss

 

 

(28

)

 

 

-

 

 

 

(37

)

 

 

(2

)

Interest income

 

 

242

 

 

 

8

 

 

 

658

 

 

 

21

 

Interest expense

 

 

(1,338

)

 

 

(908

)

 

 

(3,783

)

 

 

(2,022

)

Loss on extinguishment of debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,842

)

Gain on change in fair value of warrant liabilities

 

 

-

 

 

 

171

 

 

 

-

 

 

 

553

 

Net loss

 

$

(12,765

)

 

$

(9,459

)

 

$

(38,609

)

 

$

(29,591

)

Accretion of preferred stock to redemption value

 

 

-

 

 

 

(81

)

 

 

-

 

 

 

(81

)

Net loss attributable to common stockholders

 

$

(12,765

)

 

$

(9,540

)

 

$

(38,609

)

 

$

(29,672

)

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

 

$

(0.65

)

 

$

(10.90

)

 

$

(2.16

)

 

$

(35.59

)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(72

)

 

 

-

 

 

 

(70

)

 

 

-

 

Total other comprehensive loss

 

$

(72

)

 

$

-

 

 

$

(70

)

 

$

-

 

Total comprehensive loss

 

$

(12,837

)

 

$

(9,459

)

 

$

(38,679

)

 

$

(29,591

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares used in calculating net loss per share, basic and diluted

 

 

19,531,153

 

 

 

875,453

 

 

 

17,854,730

 

 

 

833,738

 

VAPOTHERM, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)

 

 

 

September 30, 2019

 

December 31, 2018

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

83,522

 

 

$

58,223

 

Accounts receivable, net

 

 

6,848

 

 

 

7,107

 

Inventory

 

 

10,844

 

 

 

13,710

 

Prepaid expenses and other current assets

 

 

2,067

 

 

 

2,683

 

Total current assets

 

 

103,281

 

 

 

81,723

 

Property and equipment, net

 

 

14,307

 

 

 

13,416

 

Restricted cash

 

 

1,852

 

 

 

1,799

 

Goodwill

 

 

539

 

 

 

-

 

Intangible assets, net

 

 

351

 

 

 

-

 

Other long-term assets

 

 

406

 

 

 

308

 

Total assets

 

$

120,736

 

 

$

97,246

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,644

 

 

$

3,148

 

Contract liabilities

 

 

123

 

 

 

79

 

Accrued expenses and other current liabilities

 

 

8,888

 

 

 

7,653

 

Short-term line of credit

 

 

2,912

 

 

 

3,163

 

Total current liabilities

 

 

13,567

 

 

 

14,043

 

Long-term loans payable

 

 

41,716

 

 

 

31,317

 

Deferred income tax liability

 

 

90

 

 

 

-

 

Other long-term liabilities

 

 

225

 

 

 

325

 

Total liabilities

 

 

55,598

 

 

 

45,685

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock ($0.001 par value) 25,000,000 shares authorized; no shares issued and outstanding as of September 30, 2019 and December 31, 2018

 

 

-

 

 

 

-

 

Common stock ($0.001 par value) 175,000,000 shares authorized as of September 30, 2019 and December 31, 2018, 20,801,613 and 16,782,837 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively

 

 

21

 

 

 

17

 

Additional paid-in capital

 

 

318,178

 

 

 

265,926

 

Accumulated deficit

 

 

(252,991

)

 

 

(214,382

)

Accumulated other comprehensive loss

 

 

(70

)

 

 

-

 

Total stockholders' equity

 

 

65,138

 

 

 

51,561

 

Total liabilities and stockholders’ equity

 

$

120,736

 

 

$

97,246

 

VAPOTHERM, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(38,609

)

 

$

(29,591

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,219

 

 

 

1,561

 

Stock-based compensation expense

 

 

2,755

 

 

 

367

 

Loss on disposal of property and equipment

 

 

112

 

 

 

306

 

Provision for bad debts

 

 

77

 

 

 

101

 

Loss on extinguishment of debt

 

 

-

 

 

 

1,842

 

Amortization of discount on debt

 

 

171

 

 

 

95

 

Change in fair value of warrants

 

 

-

 

 

 

(553

)

Changes in operating assets and liabilities, net of acquisition:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

616

 

 

 

896

 

Inventory

 

 

3,382

 

 

 

(1,082

)

Prepaid expenses and other assets

 

 

528

 

 

 

(1,011

)

Accounts payable

 

 

(1,551

)

 

 

(336

)

Contract liabilities

 

 

(31

)

 

 

2

 

Accrued expenses and other current liabilities

 

 

1,801

 

 

 

(1,193

)

Net cash used in operating activities

 

 

(28,530

)

 

 

(28,596

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Acquisition of business, net of cash acquired

 

 

(1,560

)

 

 

-

 

Purchases of property and equipment

 

 

(3,132

)

 

 

(3,997

)

Net cash used in investing activities

 

 

(4,692

)

 

 

(3,997

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Issuance of common stock in connection with public offering of common stock, net of issuance costs

 

 

48,308

 

 

 

-

 

Proceeds on loans

 

 

10,500

 

 

 

30,374

 

Repayment of loans payable

 

 

-

 

 

 

(20,000

)

Debt issuance costs

 

 

(322

)

 

 

-

 

Short-term line of credit

 

 

(260

)

 

 

(1,333

)

Proceeds from issuance of redeemable convertible preferred stock, net

 

 

-

 

 

 

9,919

 

Proceeds from exercise of stock options and purchase of restricted stock

 

 

374

 

 

 

325

 

Net cash provided by financing activities

 

 

58,600

 

 

 

19,285

 

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

 

 

(26

)

 

 

-

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

25,352

 

 

 

(13,308

)

Cash, cash equivalents and restricted cash

 

 

 

 

 

 

 

 

Beginning of period

 

 

60,022

 

 

 

28,360

 

End of period

 

$

85,374

 

 

$

15,052

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

 

Interest paid during the period

 

$

3,563

 

 

$

2,035

 

Issuance of warrants in conjunction with debt draw down

 

$

293

 

 

$

-

 

Property and equipment purchases in accrued expenses

 

$

222

 

 

$

472

 

Non-GAAP Financial Measures

The following tables contain a reconciliation of net loss to Adjusted EBITDA for the three months ended September 30, 2019 and 2018, respectively.

 

 

 

Three Months Ended September 30,

 

 

 

Amount

 

 

Change

 

 

 

2019

 

 

2018

 

 

$

 

 

%

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except percentages)

 

 

 

 

 

 

 

 

 

Net loss

 

$

(12,765

)

 

$

(9,459

)

 

$

(3,306

)

 

 

-35.0

%

Interest expense, net

 

 

1,096

 

 

 

900

 

 

 

196

 

 

 

-21.8

%

Depreciation and amortization

 

 

812

 

 

 

570

 

 

 

242

 

 

 

-42.5

%

EBITDA

 

$

(10,857

)

 

$

(7,989

)

 

$

(2,868

)

 

 

-35.9

%

Foreign currency

 

 

28

 

 

 

-

 

 

 

28

 

 

 

100.0

%

Change in fair value of warrant liabilities

 

 

-

 

 

 

(171

)

 

 

171

 

 

 

-100.0

%

Stock-based compensation

 

 

140

 

 

 

133

 

 

 

7

 

 

 

-5.3

%

Adjusted EBITDA

 

$

(10,689

)

 

$

(8,027

)

 

$

(2,662

)

 

 

-33.2

%

 

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

Source: Vapotherm, Inc.

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