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VI

VAPOTHERM INC (VAPO)·Q3 2023 Earnings Summary

Executive Summary

  • Net revenue was $15.2M, up 12.0% year over year, driven by strong disposables (+18%) and capital (+24.7%) demand; gross margin was 39.6% (down 320 bps sequentially vs Q2) due to Mexico capacity ramp inefficiencies ahead of RSV/flu season .
  • GAAP operating expenses fell to $16.3M (Q/Q -$0.7M; Y/Y -$8.5M), Adjusted EBITDA improved to -$6.1M (from -$17.7M in Q3’22), and unrestricted cash ended at $14.4M (down $3.6M Q/Q), reflecting continued progress on Path-to-Profitability .
  • FY23 guidance was lowered: revenue to $69–$71M (from $70–$73M), gross margin to 41%–43% (from 43%–45%), and operating expenses to $68–$70M (from $70–$72M); year-end cash remains targeted at $10–$15M .
  • The company met its one-time minimum net revenue covenant ($25M required vs $31.2M achieved for the six months ended Sept 30) and remains in compliance with its minimum unrestricted cash covenant of $5.0M .
  • Near-term catalysts: HYPERACT trial initial presentation in Jan 2024 (non-inferiority vs BiPAP with no adverse events) and continued HVT 2.0 adoption; guidance resets and gross margin trajectory will likely drive investor narrative .

What Went Well and What Went Wrong

What Went Well

  • Non-GAAP net revenue growth “in the upper teens” (17.6% ex-Access) despite OPEX reductions; CEO: “We are pleased to deliver Non-GAAP net revenue growth in the upper teens… and [to] share the results of the HYPERACT clinical trial” .
  • Capital revenue rose 24.7% on strong HVT 2.0 sales; disposables increased 18.0% Y/Y, with international strength (revenue +58.6% Y/Y) .
  • Adjusted EBITDA improved meaningfully to -$6.1M in Q3’23 vs -$17.7M in Q3’22; non-GAAP cash OPEX fell to $12.3M (Q/Q -$1.9M; Y/Y -$7.2M) due to Path-to-Profitability initiatives .

What Went Wrong

  • Sequential gross margin declined 320 bps vs Q2 as Mexico facility capacity ramp caused inefficiencies; Q3 gross margin of 39.6% vs 42.8% in Q2 .
  • FY23 revenue and margin guidance were reduced again (now $69–$71M and 41%–43% gross margin); sequential cash declined to $14.4M (from $18.0M), though management still targets $10–$15M year-end cash .
  • Net loss was $15.1M in Q3 (EPS -$2.38), reflecting ongoing interest expense headwinds and scale transition; compares to Q2 net loss of $14.8M (EPS -$0.29) and Q3’22 net loss of $26.2M (EPS -$7.85) .

Financial Results

MetricQ1 2023Q2 2023Q3 2023
Revenue ($USD Millions)$17.731 $16.037 $15.167
Gross Margin (%)35.0% 42.8% 39.6%
GAAP Operating Expenses ($USD Millions)$19.836 $17.016 $16.284
Adjusted EBITDA ($USD Millions)-$9.183 -$6.381 -$6.076
Net Loss ($USD Millions)-$18.090 -$14.788 -$15.130
Diluted EPS ($USD)-$0.45 -$0.29 -$2.38
Unrestricted Cash ($USD Millions)$25.713 $18.000 $14.418
Segment Revenue ($USD Millions)Q1 2023Q2 2023Q3 2023
Capital (product & lease)$3.901 $3.646 $2.486
Disposables$12.417 $10.927 $11.170
Service and other$1.413 $1.464 $1.511
Total$17.731 $16.037 $15.167
Geography Revenue ($USD Millions)Q1 2023Q2 2023Q3 2023
United States$13.014 $11.847 $11.231
International$4.717 $4.190 $3.936
Total$17.731 $16.037 $15.167
KPIsQ1 2023Q2 2023Q3 2023
Installed Base – United States (units)24,488 24,563 24,548
Installed Base – International (units)12,586 12,729 12,889
Installed Base – Total (units)37,074 37,292 37,437
Units Sold/Leased – United States260 293 147
Units Sold/Leased – International127 146 128
Units Sold/Leased – Total387 439 275
Disposable Patient Circuits – United States81,219 69,323 70,420
Disposable Patient Circuits – International39,184 35,744 33,501
Disposable Patient Circuits – Total120,403 105,067 103,921
Q3 2023 vs Q3 2022Value
Revenue YoY+12.0% ($15.167M vs $13.545M)
Disposables Revenue YoY+18.0%
Capital Revenue YoY+24.7%
Gross Margin YoY39.6% vs 13.8% (driven by non-recurring inventory actions in Q3’22 and revenue growth)
Net Loss YoY-$15.130M vs -$26.201M; EPS -$2.38 vs -$7.85

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2023$70–$73M (as of Q2) $69–$71M Lowered
Gross MarginFY 202343%–45% (as of Q2) 41%–43% Lowered
Operating Expenses (GAAP)FY 2023$70–$72M (as of Q2) $68–$70M Lowered
Non-GAAP Cash OPEXFY 2023$55–$57M (as of Q2) $54–$56M Lowered
Year-End Unrestricted CashFY 2023$10–$15M (as of Q2) $10–$15M Maintained
Revenue Mix – Disposables Long-Term TargetLong-term~75% of total ~75% (slightly lower in 2023 due to HVT 2.0 receptivity) Maintained (2023 mix slightly lower)

Earnings Call Themes & Trends

Note: The Q3 2023 earnings call transcript could not be retrieved due to a document database inconsistency. Conference call logistics confirmed the call took place Nov 8, 2023; transcript unavailable for analysis .

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Manufacturing transition to Mexico / gross margin trajectoryQ1: Initial benefits; GM +750 bps Q/Q to 35.0% . Q2: Continued benefits; GM 42.8% (+780 bps Q/Q) .Q3: GM 39.6%; sequential -320 bps due to capacity ramp inefficiencies ahead of seasonality .Improving long-term; near-term volatility due to ramp timing.
HVT 2.0 product performanceQ1: Strong market receptivity; capital sales up vs Q4’22 . Q2: Strong capital sales; disposables recovering post-COVID .Q3: Capital +24.7% Y/Y; disposables +18.0% Y/Y; international strength .Positive adoption sustained.
Path-to-Profitability / OPEX controlQ1: GAAP OPEX $19.8M; non-GAAP cash OPEX $16.4M; sequential improvement . Q2: GAAP OPEX $17.0M; non-GAAP cash OPEX $14.2M; further improvement .Q3: GAAP OPEX $16.3M; non-GAAP cash OPEX $12.3M; continued improvement .Improving.
Cash burn / liquidityQ1: Cash $25.7M; private placement closed; burn > half in Q1 . Q2: Cash $18.0M; burn down vs Q1 .Q3: Cash $14.4M; covenant compliance maintained; year-end $10–$15M targeted .Tight but managed; covenant compliant.
Clinical / regulatoryNot highlighted.HYPERACT trial accepted for Jan 2024 Congress; non-inferiority primary endpoint; no adverse events .Emerging positive validation.
Regional trendsQ1: US 73.4% of revenue; Intl 26.6% . Q2: US 73.9%; Intl 26.1% .Q3: US 74.0%; Intl 26.0%; Intl growth +58.6% Y/Y .International acceleration.

Management Commentary

  • Q3 CEO: “We are pleased to deliver Non-GAAP net revenue growth in the upper teens despite the significant reductions we have made in operating expenses… and are excited to share the results of the HYPERACT clinical trial” .
  • Q2 CEO: “HVT 2.0 sales continue to be strong… nearly 800 basis point sequential improvement in gross margin… significant progress in reducing cash operating expenses, inventory and cash burn” .
  • Q1 CEO: “Market receptivity to HVT 2.0 continues to be strong… sequential quarter improvements in gross margin, operating expenses and cash burn” .

Q&A Highlights

  • Transcript unavailable due to a document database inconsistency; therefore, Q&A themes and clarifications cannot be extracted. The company hosted its Q3 call on Nov 8, 2023 (details provided in press release) .

Estimates Context

  • Wall Street consensus estimates from S&P Global for VAPO (Q3 2023 Revenue, EPS, EBITDA) were unavailable due to missing Capital IQ mapping for this ticker. As a result, no beat/miss analysis versus S&P Global consensus can be provided at this time.

Key Takeaways for Investors

  • Solid Y/Y revenue growth (+12%) and mix quality (capital +24.7%, disposables +18.0%) underscore HVT 2.0 traction, particularly internationally (+58.6% Y/Y) .
  • Sequential gross margin pullback (39.6% vs 42.8%) was operational (Mexico ramp inefficiencies); watch margins in Q4 as capacity utilization normalizes .
  • OPEX discipline is tangible (GAAP OPEX down to $16.3M; non-GAAP cash OPEX $12.3M), supporting improved Adjusted EBITDA (-$6.1M) despite lower revenue vs Q2 .
  • Liquidity remains tight but managed ($14.4M unrestricted cash; covenants met), with year-end $10–$15M reaffirmed; monitor cash burn and covenant thresholds through Q4 .
  • FY23 guidance reductions reset expectations (revenue to $69–$71M; GM to 41%–43%); stock narrative likely driven by evidence of margin recovery and HVT 2.0 demand durability .
  • Clinical validation is a potential medium-term catalyst: HYPERACT trial acceptance (non-inferiority vs BiPAP; no adverse events) could aid adoption and clinical mindshare .
  • With S&P Global consensus unavailable, trading setups will hinge on internal guidance, margin cadence, and international momentum rather than near-term estimate beat/miss framing.