Vapotherm, Inc.

Good afternoon, ladies and gentlemen, and welcome to the VapoTherm Second Quarter 2021 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 Luster of Restweek. Please go ahead, sir.

Good afternoon, and thank you for joining us for the VapoTherm Second 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 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, 2020, which was filed with the Securities and Exchange Commission, or SEC, on February 24th, 2021. Our quarterly reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021, which were filed with the SEC on May 5th, 2021 and August 9th, 2021, 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 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 on the investor relations portion of our website. With that, it's my pleasure to turn the call over to Maple Thames President and Chief Executive Officer, Joe Army.

Good afternoon, and thank you for joining us today. I'll begin by discussing our second quarter results. Then I'll hand the call over to John Landry, our CFO, to provide the financial details for our second quarter 2021 results. I'll then update you on our key focus areas for the remainder of the year before taking questions. 2Q was another strong quarter for VaporFirm. We generated $20.6 million in revenue and increased our worldwide install base by nearly 1,200 units to over 32,000 units. The majority of this increase was driven by our international business, as COVID-19 was still prevalent in some areas outside the US, notably Latin America. We rebranded HGE Digital Health as Vapoterm Access and prepared to launch our Vapoterm Access post-care offering. Lastly, we hosted our first ever investor day in our Exeter, New Hampshire headquarters, where we shared more about our strategy, products, and financial goals for the business. Our objectives for 2021 remain the same. One, ensure the current installed base is productive. Two, grow the installed base. Three, launch HVT 2.0. And four, establish our digital business. These four objectives will guide us towards our goal of becoming the complex lung disease patient management company. Let me walk you through the progress we've made towards each of these during this quarter. Our first objective is to ensure the current installed base is productive. On that front, our One Hospital One Day or 1H1B strategy is focused on training and educating customers on our technology's ability to treat both hypoxic and hypercapnic patients. As part of this strategy, we actively engaged our ED speakers bureau to educate our customers on how to use our technology on all patients and to share their positive experience with high-velocity therapy, especially with hypercapnic patients. As John will share with you, U.S. disposable utilization rates were lower in 2Q than our historical average. This is due to two main factors. First, we increased our install base by 65% over the past five quarters, and as we expected, it will take time for our customers to get up to speed on other non-COVID applications for our technology. While the overall U.S. disposable utilization rate for 2Q was below historical averages, The disposable utilization rate for our top 200 U.S. customers was at or above the historical disposable utilization rate in 2Q. In addition, 93% of these accounts placed orders in 2Q and all but a few of the remaining accounts placed orders in 3Q after burning off larger purchases made through 1Q. This gives us confidence that our 1H1B strategy is working and we'll be able to achieve historical turnovers across the entire customer base post-COVID. Second, US respiratory census as measured by respiratory discharges for insured patients was 20% lower in the second quarter of 2021 versus the second quarter of 2019. We believe this trend to be temporary and due to reduced flu, RSV and COPD patients staying away from the hospital as a result of COVID related fears. Over time, we expect that these patients will return to the hospital. While respiratory census was down 20% in 2Q as compared to 2Q19, our U.S. disposable revenue grew 18% over the same period, which gives us confidence that we'll be able to grow our business in the mid-teens post-COVID. We're also focused on building our strong base of clinical evidence and working to be included in additional society guidelines. Our HYPERACT study, designed to further support our ability to treat hypercapnic patients, now has four centers trained and is enrolling patients. Our U.S. field team is educating our customers on the recently issued Platinical study published in Argentina, which focused on hypercapnic patients. I'm pleased to report that high-velocity therapy was included in the AARC's recently issued Safe and Effective Staffing Guide. As a result, our technology will receive the same productivity credit as BiPAP and CPAP, which eliminates a potential barrier to the adoption of our technology. These guideline changes and study results serve as important resources in our 1H1B educational efforts. We are working to increase revenue per installed unit through the introduction of new products like our oxygen assist model, or HOME. OM is now available in 18 countries and also includes subscription-based revenue, which increases the recurring revenue per installed unit. We are pleased with the year-to-date results from our OM launch in the UK, Europe, and the Middle East, and we continue to receive positive feedback from our customers, patients, and their families. Our second objective is to grow our installed base. Our focus is to drive the growth of the installed base in both existing and new accounts by leveraging our expanded Salesforce in the U.S. and select international markets. In the U.S., we grew our installed base by nearly 300 units and added 12 new ED gold and silver accounts in 2Q. We saw roughly two-thirds of this installed base expansion coming from existing accounts, with one-third coming from new accounts. At the end of 2Q, we were in nearly 500 ED gold and silver accounts in the U.S. Internationally, we grew our install base by over 900 units, largely driven by high rates of COVID-19 hospitalizations in Latin America. Our third objective is to launch HVT 2.0 worldwide. HVT 2.0 has its own built-in air source, which will allow us to break free from the need to be connected to a hospital's piped-in air. Our initial focus with HPT 2.0 will be on the hospital market where we have an existing customer footprint. We expect to initiate a worldwide limited market release later this year. We will also use the limited market release to learn how our HPT 2.0 might be able to help patients in new care settings, including the home and EMS settings, as well as how we can integrate it with vapor therm access. Our final objective is to establish our digital business, now branded Vapotherm Access. Our initial product, Vapotherm Access Post Care, will manage COPD patients after discharge and seek to lower 30-day COPD readmission rates. As you know, if a hospital's 30-day COPD readmission rate is above the national average, the hospital pays a fine on its entire book of CMS business. In preparation for this launch, our entire U.S. field team was trained on this technology offering in July. We will initially target our gold and silver ED accounts with significant COPD patient discharge volumes, and we'll focus on preventing or reducing COPD readmissions. We will learn from this new product launch as we expand our Vapotherm access offerings beyond post-care. Overall, I am very proud of our success in the first half of 2021. Our team continues to meet the needs of our customers each day in a dynamic market, and I am very excited about what 3Q and the remainder of the year holds for our business. After John details our financial results, I'll spend some time outlining our focus for 3Q and the remainder of 2021. Johnny? Thank you, Joe.