Vapotherm, Inc. (NYSE: VAPO), ('Vapotherm' or the 'Company'), today announced third quarter 2023 financial results and related highlights.
Third Quarter 2023 Financial Results and Related Highlights
Net revenue for the third quarter of 2023 was $15.2 million, an increase of 12.0% as compared to the third quarter of 2022
Non-GAAP net revenue excluding the Vapotherm Access call center business, which the Company exited in the fourth quarter of 2022, increased by 17.6% as compared to the third quarter of 2022
Disposables revenue increased by 18.0% as compared to the third quarter of 2022
Capital revenue increased by 24.7% as compared to the third quarter of 2022 due to strong HVT 2.0 sales
Gross margin in the third quarter of 2023 was 39.6%
For the third quarter of 2023, GAAP operating expenses were $16.3 million and non-GAAP cash operating expenses were $12.3 million. Both decreased compared to the prior year period and second quarter of 2023 as a result of the Company's Path to Profitability initiatives:
GAAP operating expenses decreased by $0.7 million from the second quarter of 2023 and by $8.5 million from the third quarter of 2022
Non-GAAP cash operating expenses decreased by $1.9 million from the second quarter of 2023 and by $7.2 million from the third quarter of 2022
The Company's unrestricted cash and cash equivalents was $14.4 million at the end of the third quarter of 2023, a decrease of $3.6 million from the Company's unrestricted cash and cash equivalents balance of $18.0 million at the end of the second quarter of 2023
This decrease compares to a decrease of $7.7 million in the Company's unrestricted cash and cash equivalents in the second quarter of 2023
The Company met its 2023 one-time minimum net revenue covenant requirement of $25 million for the six month period ended September 30, 2023. The Company recorded net revenue of $31.2 million for this measurement period
The Company's next minimum net revenue covenant test will begin in 2024 with the minimum net revenue level set at a discount to the Company's 2024 Annual Operating Plan
The Company remains in compliance with its minimum unrestricted cash and cash equivalents covenant of $5.0 million
The HYPERACT clinical trial has been accepted for initial presentation at the Society for Critical Care Medicine Congress in January 2024. The trial was designed to compare the ability of the Company's HVNI technology to treat acute hypercapnic respiratory failure in the Emergency Department compared to bi-level positive airway pressure, a form of non-invasive ventilation delivered via a form-fitting face mask. The trial focused on moderate to severe COPD patients with carbon dioxide levels above 60 and pH levels below 7.35. While bi-level pressure systems are the current standard of care, many patients cannot tolerate the discomfort and complications associated with the masks required for those systems. The primary endpoint of the trial was non-inferiority of HVNI with additional measurements of associated laboratory values, ease of use, and patient comfort. There were no adverse events.
'We are pleased to deliver Non-GAAP net revenue growth in the upper teens despite the significant reductions we have made in operating expenses over the past 6 quarters,' said Joseph Army, President and CEO. 'In addition, we have made significant progress in reducing our cash burn as we move towards profitability and are excited to share the results of the HYPERACT clinical trial with the medical community.'
Non-GAAP Financial Measures
This press release includes non-GAAP financial measures, including non-GAAP net revenue excluding Vapotherm Access, EBITDA, Adjusted EBITDA, non-GAAP operating expenses excluding impairment of goodwill, impairment of long-lived and intangible assets and gain (loss) on disposal of property and equipment, and non-GAAP cash operating expenses excluding additional items, including stock-based compensation expense, depreciation and amortization, termination benefits, gain from deconsolidation, and change in fair value of contingent consideration, which differ from operating expenses calculated in accordance with U.S. generally accepted accounting principles ('GAAP'). Non-GAAP net revenue excluding Vapotherm Access represents net revenue less net revenue of Vapotherm Access, which the Company exited in the fourth quarter of 2022. EBITDA represents net loss less interest expense, net, income tax provision or benefit, and depreciation and amortization, and Adjusted EBITDA represents EBITDA as further adjusted for the impact of foreign currency loss or gain, change in fair value of contingent consideration, stock-based compensation expense, impairment of goodwill, impairment of long-lived and intangible assets, gain from deconsolidation, and gain on disposal of property and equipment. Since these adjustments to the GAAP measures are highly variable, difficult to predict and of a size that could have substantial impact on Vapotherm's reported results of operations for a period, Vapotherm cannot provide without unreasonable effort a quantitative reconciliation to the most directly comparable GAAP measures for its 2023 financial guidance regarding non-GAAP cash operating expenses. The Company has reconciled all historical non-GAAP financial measures with the most directly comparable GAAP financial measures in tables accompanying this release.
These non-GAAP financial measures are presented because the Company believes they are useful indicators of its operating performance. Management uses these non-GAAP financial measures, as measures 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 these measures are useful to investors as supplemental information because they are 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.
These non-GAAP financial measures should not be considered alternatives 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. They should not be construed to imply that the Company's future results will be unaffected by unusual or non-recurring items. In addition, Adjusted EBITDA 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 contains 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 the Adjusted EBITDA 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 and other non-GAAP financial measures on a supplemental basis. The Company's definitions of Adjusted EBITDA and non-GAAP operating expenses excluding impairment of long-lived and intangible assets and loss on disposal of property and equipment and non-GAAP cash operating expenses excluding the additional items detailed below, are not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.
About Vapotherm
Vapotherm, Inc. (NYSE: VAPO) 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 4.1 million patients have been treated with the use of Vapotherm high velocity therapy systems. For more information, visit www.vapotherm.com.
Vapotherm high velocity therapy is mask-free non-invasive respiratory support 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. The HVT 2.0 and Precision Flow systems' mask-free interface delivers optimally conditioned breathing gases, making it comfortable for patients and reducing the risks and care complexities associated with mask therapies. While being treated, patients can talk, eat, drink and take oral medication.
Legal Notice Regarding Forward-Looking Statements
This press release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995, including statements about the Company's expected net revenue, including revenue breakdown, gross margin, operating expenses, non-GAAP cash operating expenses and unrestricted cash and cash equivalents balance as of the end of 2023. In some cases, you can identify forward-looking statements by terms such as 'expect,' 'continue,' 'plan,' 'intend,' 'will,' 'outlook,' 'guidance,' or 'typically,' or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words, and the use of future dates. 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 or achieve its 2023 financial guidance including anticipated unrestricted cash and cash equivalents as of the end of 2023; risks associated with its manufacturing operations in Mexico; Vapotherm's ability to raise additional capital to fund its existing commercial operations, develop and commercialize new products, and expand its operations; Vapotherm's ability to comply with its financial covenants, execute on its path-to-profitability initiative, convert excess inventory into cash and fund its business through 2023; Vapotherm's dependence on sales generated from its High Velocity Therapy systems, competition from multi-national corporations who have significantly greater resources than Vapotherm and are more established in the respiratory market; the ability for High Velocity Therapy systems to gain increased market acceptance; Vapotherm's inexperience directly marketing and selling its products; the potential loss of one or more suppliers and dependence on its new third party manufacturer; 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, maintain or enforce patent or other intellectual property protection for its products; the impact of COVID on its business, including its supply chain, risks associated with the reverse stock split, Vapotherm's ability to regain compliance with the continued listing standards of the NYSE, market conditions and the impact of the reverse stock split on the trading price of Vapotherm's common stock, a possible delisting of Vapotherm's common stock 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, 2022, as filed with the SEC on February 23, 2023, and in its subsequent filings with the SEC, including its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023. 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.
Contact:
Tel: +1 (603) 658-0011
VAPOTHERM, INC. 
