Vapotherm, Inc.

Good day and thank you for standing by. Welcome to the ViproCerm Inc. First Quarter 2021 Financial Results Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone keypad. Please be advised that today's conference is being recorded. And if you require any other assistance, I would now turn the call over to your speaker today, Mr. Mark Klossner. Please go ahead.

Good afternoon, and thank you for joining us for the VapoTherm first quarter 2021 financial results conference call. Joining us on today's call are VapoTherm's President and Chief Executive Officer, Joe Army, 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 listen to 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, 2020, which was filed with the Securities and Exchange Commission on February 24, 2021, and our quarterly report on Form 10-Q for the quarter ended March 31, 2021, which was filed with the SEC on May 5, 2021 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 accepted 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 and 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.

Good afternoon, and thank you for joining us today. I will begin by discussing our first quarter results. Then I will hand the call over to John Landry, our CFO, to provide the financial details of our first quarter 2021 results. I will then update you on our key areas of focus for the remainder of the year before taking questions. First quarter was another strong quarter for PayPal. We generated $32.3 million in revenue, a 69% increase over first quarter 2020. and increased our worldwide installed base by nearly 2,200 units to 30,829 units. Of note, we significantly increased our installed base in Latin America, which we expect will pay dividends for years to come. Lastly, we printed a 40 or 53 percent gross margin for the quarter, and our adjusted EBITDA loss was 5.2 million, or roughly half of our adjusted EBITDA loss for the first quarter of 2020. As I mentioned on our last earnings call, our objectives for 2021 are to, one, ensure the current installed base is productive, two, grow the installed base, and three, launch HVT 2.0. Let me walk you through the progress we've made towards each of these during the quarter. In addition, I'd like to update you on our recent HGE digital health acquisition and share a little more color on our plans for this business in 2021. Our first objective is to ensure the current installed base is productive, especially the precision flow units that were installed in 2020. In the first quarter, we were able to continue driving increased awareness of our technology and education, particularly in our key targeted gold and silver ED accounts, which represent the top 2000 ED hospitals as measured by respiratory discharges. And at the end of the first quarter of 2021, We were in nearly 500 ED gold and silver accounts in the U.S., which reflects nearly a 50% increase from a year ago. Recall, EDs are important to us as over 50% of all hospital admissions come through the ED. These gold and silver ED accounts are especially important to us as they are some of the largest accounts in the U.S., treat a significant number of patients, and are highly referenceable accounts. As COVID-19 hospitalizations decreased across the United States from the early January peak, we were able to accelerate our customer education efforts, specifically our 1H1D, or one hospital, one day strategy. This is a customer education-focused strategy where a member of our team meets with one of the hospital customers, either in person or remotely, and educates all the stakeholders across each care area of that hospital on how to use high-velocity therapy to treat patients in respiratory distress who are either hypoxic or, most importantly, hypercapnic. You may recall hypoxic patients, such as COVID-19 patients, are not absorbing enough oxygen into their system. Hypercapnic patients, such as COPD patients, have difficulty clearing carbon dioxide from their systems. In addition to on-site and virtual visits, we've had good success with our virtual Vapotherm Academy, We've now educated over 28,000 clinicians on the efficacy of our high-velocity therapy for treating patients in respiratory distress who are either hypoxic or hypercapnic. We continue to develop new content in order to drive more traffic to this important clinical education resource. Our growing base of clinical evidence further demonstrates our technology's ability to treat patients in respiratory distress, including hypercapnic patients. with the same efficacy as other forms of non-invasive ventilation, but with the ease and comfort of a nasal cannula. In the first quarter, a study out of Argentina focused on hypercapnic patients was published in Critical Care Explorations, a journal of the Society of Critical Care Medicine. We found this study to be impactful for the following reasons. One, clinicians reported over an success rate in avoiding intubations for severe hypercapnic patients when treating patients here. Two, when it worked, it worked within the first hour. And three, reductions in CO2 as measured by a blood gas draws were comparable to levels achieved with other forms of non-invasive ventilation, primarily BiPAP. In addition, we continue to make progress on our HyperX study in the U.S., which is focused on providing further support of our technology's ability to treat hypercapnic patients. The study is designed to demonstrate, among other things, that patients with severe hypercapnia treated with our equipment will achieve relief of shortness of breath comparable to positive pressure non-invasive ventilation. Patient enrollment has been slower than expected at the outset due to fewer than usual visits to the emergency department for such patients during the pandemic. But we believe enrollment will accelerate as vaccines roll out and COVID-19 hospitalizations decrease. One of the other ways we're looking to increase the productivity of our installed base is through the introduction of additional products, including recurring revenue products like an oxygen assist module or OM. 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 device. We are pleased with the initial results from our full launch in the UK, Europe, Middle East. We're now in 10 countries, and like that recurring revenue model that Ohm provides. Given Ohm's initial success, we are now working on quantifying Ohm's economic value to potentially pursue reimbursement in the UK and other EU markets. We're also continuing to work with the FDA through the Breakthrough Devices Program to clear OM in the U.S. I am pleased to announce that our IDE clinical study was approved, which represents the first step in this process. We expect to begin enrolling patients in this clinical study in the near future. Our second objective is to increase our install base. The focus here is to continue to drive the growth of our installed base in both existing and new accounts by leveraging our expanded sales force in both the US and internationally. In the US, we grew our installed base by over 850 units and added 21 new gold and silver ED accounts this quarter. Internationally, we grew our installed base by over 1,300 units, largely driven by high rates COVID-19 hospitalizations in Latin America. Our final objective is launching HVT 2.0 worldwide. HVT 2.0 will have its own built-in air compressor technology, which will allow us to break free from the need to be connected to a hospital's piped-in air. This will allow us to expand our footprint into areas of the hospital that don't have piped-in air, which we estimate to be 50% of all hospital beds in the United States. We're pleased to have received a CE mark for HVT 2.0 and expect to initiate a limited market release in the EU in the second quarter before moving into full market release later in the year. In the US, we anticipate bringing the HVT 2.0 to market in the second half of 2021. In the first quarter, we received an emergency use authorization in the US to treat COVID-19 patients in respiratory distress during the pandemic. The HVT 2.0 EUA does not change our overall timing for full market release. Instead, it provides us with an additional way to serve our customers in the unlikely event COVID-19 demand exceeds our ability to supply precision flows into the market. Our initial focus with HVT 2.0 will be on the hospital market where we have an existing customer footprint. In addition, we will use the second half of the year to learn how our HVT 2.0 might be able to help patients in the EMS and home settings, including in conjunction with our HGE digital health services. As you may recall, HGE is a remote patient monitoring platform, which we acquired in the fourth quarter of 2020 to empower COPD patients, providers, and payers to manage day-to-day symptoms at home, reduce or prevent ED visits, lower costs, and improve their quality of life. In the second quarter, we expect to begin working with certain hospital customers to launch a pilot program to monitor patients at home for 30 days post-discharge. We believe that by monitoring CLPD patients in the home, it may help our ED Gold Hospital customers reduce their 30-day readmission rates. As a result of COVID-19, we have seen a desire toward treating these patients at home instead of in the hospital to improve patient quality of life and reduce costs. We believe HGE's remote patient monitoring program, when coupled with our high-velocity therapy, may enable these patients to be treated at home more effectively in the future. First of all, I'm proud of our strong start to 2021. our team is continuing to perform each day in an unprecedented operating environment. I am very excited for what 2Q and the remainder of the year holds for our business. And after John details our financial results, I'll spend some time outlining our focus for 2Q in 2021. John? Thank you, Joe.