Vapotherm, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Vapotherm Third Quarter 2020 Financial Results Conference Call. As a reminder, this call is being webcast live and recorded. It is now my pleasure to introduce your host, Mr. Mark Klausner of Westwick. Please go ahead, sir.

Good afternoon, and thank you for joining us for the Vapotherm Third Quarter 2020 Financial Results Conference Call. Joining us on today's call are Vapotherm's President and Chief Executive Officer, Joe Armie, and its Senior Vice President and Chief Financial Officer, John Landry. I would like to remind you that this call is being webcast live and recorded. A replay of the event will be available following the call on our website. To access the webcast, please visit the events link in the IR section of our website, vapotherm.com. Before we begin, I would like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements. These statements are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those identified in the risk factor section of our annual report filed on Form 10-K for the year-ended December 31, 2019, which was filed with the Securities and Exchange Commission, or the SEC, on March 4, 2020. and our quarterly reports on Form 10-Q for the first, second, and third quarters of 2020 as filed with the SEC on May 5, 2020, August 4, 2020, and November 4, 2020, respectively, and in any subsequent filings with the SEC. Such risk factors may be updated from time to time in our filings with the SEC, which are publicly available on our website. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events, or otherwise, unless required by law. This call will also include references to certain financial measures that are not calculated in accordance with generally acceptable accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the investor relations portion of our website. With that, it's my pleasure to turn the call over to Vapotherm's President and Chief Executive Officer, Joe Army.

Joe Army Thank you, Mark. Good afternoon and thank you for joining us today. I will begin by discussing our third quarter 2020 results. Then I'll hand the call over to John Landry, our CFO, to provide the financial details of our 3Q results, after which I'll update you on our key areas of focus for the remainder of the year before taking questions. 3Q was another good quarter for Vapotherm as we generated $30.6 million in revenue, a 183% increase over 3Q 2019. increased our worldwide install base by more than 2,700 units to approximately 25,000 units, and opened 43 net new gold and silver accounts in the U.S. In addition, we printed a 50.8% gross margin for the quarter despite continued significant headwinds. On our 2Q call, I stated my belief that our business had been significantly transformed as a result of two factors. One, the increased awareness and usage of our high-velocity therapy, and two, our continued progress in developing the Oxygen Assist Module, or OM for short, and our next-generation system. With another quarter under our belt, I'm increasingly confident in our ability to sustain this transformative momentum post-COVID-19. Today, I'll update you on what I'm seeing in our business that's driving my thinking on this. as well as provide an update on the work we've been doing on our product pipeline during 3Q. 2Q was incredibly hectic as we devoted a substantial amount of our energy to rapidly ramp our capacity in an effort to meet all customer needs in the midst of a significant surge in COVID-19 hospitalizations. 3Q was primarily about working to settle down and prepare the organization for sustainable long-term growth. We focused on three things this quarter. First, we ramped production capacity in an effort to meet all future customer demand. Second, we expanded our clinical education efforts to teach new customers how to use our equipment on both type 1 hypoxic and type 2 hypercapnic patients. Third, we continued work on our future growth drivers, the oxygen assist module and the next generation system. We expanded our maximum theoretical production capacity by adding new lines which are fully qualified and ready to go. We developed the capability to run three shifts per day in the event we experience a significant surge in demand for our capital units. This reduced our need for overtime and settled our production team down for the long haul. We now believe we are in a position to meet all potential future customer demand without burning out our teams. We also expanded our warehouse capacity by 40% and it implemented all applicable safety measures in an effort to keep our people safe. Importantly, we made all these changes while not adding material to our fixed cost base. On the clinical education front, our field team is focused on implementing and educating both our new and existing customers on how to use our high velocity therapy on patients suffering from both type one respiratory distress, such as those with COVID-19, and type two respiratory distress, such as those with COPD. We believe this continued focus on education will help drive the broader adoption of our technology, especially when customers experience firsthand how our high velocity therapy is different from traditional high flow therapy and how it can be used to help patients beyond COVID-19. To give you a sense of the success we are having, I'd like to share with you a story from a gold ED hospital in the New York metro area. This hospital became a customer during the initial COVID-19 surge. We believe our team did a great job getting them up to speed quickly on high-velocity therapy so they could treat the respiratory distress experienced by the surge of COVID-19 patients, most of whom were hypoxic. As the surge subsided, our team was able to educate this customer on the full clinical utility of high-velocity therapy, including type 2 patients in respiratory distress. This customer now uses us in adult ICUs, the general care floor, pediatric ICUs, and the ED, and recently converted to our new ProSoft nasal cannula, and aerosolized disposable patient circuit, which is intended to deliver aerosol medication without disrupting therapy. In addition, the customer will be trained in the NICU soon and is just placed in order to expand their fleet of precision flow units and vapotherm transfer units further. Post-surge, disposable turn rates in this hospital have ramped as we'd expect for a net new account. I am really encouraged by the trends I'm seeing in this and other customers, which gives me confidence that we can use the increased access and awareness driven by COVID-19 to support long-term growth. Our third focus was our continuing work on our future growth drivers, primarily the Oxygen Assist Module, or OM, and our next generation systems. We recently updated the Ohm software to operate with both the Medtronic Nelcor and Massimo SpO2 sensors to improve the user experience, and the early clinician feedback from the limited market release continues to be positive on both neonate and adult populations in the United Kingdom, Europe, and the Middle East. Recall that the OM device is designed to help caregivers maintain patients within a physician-prescribed oxygen saturation range while requiring significantly fewer manual adjustments to the equipment. Our pre-pandemic strategy was to focus on the neonatal patient population as our clinical data is strong. However, based on the clinical experience in the UK, Europe, and the Middle East, we now believe there is a significant unmet clinical need in both neonate and adult patient populations. We expect to move into full market release with this product in the UK, Europe, and the Middle East in 1Q 2021 and are continuing to work with FDA on the appropriate regulatory pathway in the U.S. We believe we've made good progress on our next generation system, especially given the fact that our team was restarting from a hard stop in late first quarter. While the initial version of this device will be optimized for the hospital setting, we expect to learn a great deal about clinical utilization and patient needs that will inform our strategy when we're ready to launch a home-specific product. I also want to throw up in a plug for our new Felix one portable negative pressure mask. This idea came from a respiratory therapy leader in New York city and can be used with a variety of respiratory support devices, including our high velocity therapy and may mitigate the risk of transmission of potentially infectious particles to caregivers treating COVID-19 patients. We are proud to be donating all of the profits from this product. to nonprofit funds set up by the American College of Emergency Physicians, American Association of Respiratory Care, and Emergency Nursing Association. Lastly, I want to thank all our teammates and partners around the world for their extraordinary efforts to serve our customers and their patients on the front lines during this crisis. This has been remarkable to see what they've accomplished in a very uncertain and stressful period. We believe they have repeatedly and successfully navigated the day-to-day challenges of scaling our capacity significantly while adapting to significant change at work and at home made necessary by the COVID-19 pandemic, and I've never been prouder of our team. Now I'll turn it over to John Landry, our CFO, to provide a financial review. Johnny?