Revenue of $21.6 Million In-Line with Preliminary Revenue of $20.5 Million to $21.5 Million

Vapotherm, Inc. (NYSE: VAPO), (“Vapotherm” or the “Company”), today announced first quarter 2022 financial results.

First Quarter 2022 Summary

• Total revenue for the first quarter of 2022 was $21.6 million, a decrease of 33.1% over the first quarter of 2021
• Disposables revenue for the first quarter of 2022 was $14.9 million, a decrease of 13.3% over the first quarter of 2021
• Worldwide installed base of Precision Flow systems increased by over 500 units in the first quarter of 2022 to over 35,700

“The first quarter of 2022 was challenging as respiratory patient census was low for both seasonal respiratory illnesses such as flu and RSV and for patients suffering from COPD and CHF. We also saw a significant decline in COVID-related hospitalizations starting in mid to late February, especially those patients needing acute respiratory interventions,” said Joseph Army, President and CEO. “Despite lower than expected revenue in the quarter, we are very bullish about Vapotherm’s future. In the last two years, we have transformed our business with increases in our Installed Base and new Customers. Meeting all of our Customers’ needs no matter what during the pandemic required us to make significant one-time expenditures, which impacted our margins. As we move into the endemic phase of COVID, we plan to get the business to profitability by delivering 20% year over year revenue growth beginning in 2023, accelerate gross margin improvement by moving our manufacturing operation to Mexico, and normalizing our cash operating expense to pre-COVID levels.”

Results for the Three Months March 31, 2022

The following table reflects the Company’s net revenue for the three months ended March 31, 2022 and 2021:

Net revenue for the first quarter of 2022 was $21.6 million. Capital and disposables revenue decreased in the first quarter of 2022 primarily due to a decrease in volume of sales of capital equipment and a decrease in the number of disposables sold period over period due to lower COVID-19 demand in the United States and international markets. In the first quarter of 2022, we saw decreased virulence of COVID-19 with the latest Omicron surge which resulted in lower respiratory interventions as compared to previous surges and a significant reduction in flu and RSV hospitalizations compared to pre-pandemic comparable quarters.

Revenue information by geography is summarized as follows:

Gross profit and gross margin for the first quarter of 2022 was $7.9 million and 36.6%, respectively. In the first quarter of 2022, gross margin was negatively impacted by one-time production costs that were incurred in 2021 to meet all Customer demand during the Delta and Omicron COVID surges as well as higher transportation costs and decreased labor and overhead absorption due to lower disposable volume.

Operating expenses were $27.8 million in the first quarter of 2022, an increase of $0.9 million as compared to the same period last year. The increase was primarily due to increased research and development costs associated with the development of our future generation High Velocity Therapy systems, and general and administrative expenses.

Net loss for the first quarter of 2022 was $22.9 million, or $0.87 per share, compared to $10.4 million, or $0.40 per share, in the first quarter of 2021. Net loss per share was based on 26,321,087 and 25,796,065 weighted average shares outstanding for the first quarter of 2022 and 2021, respectively.

Adjusted EBITDA was negative $15.3 million for the first quarter of 2022 as compared to negative $5.2 million for the first quarter of 2021. The increase in Adjusted EBITDA loss was primarily due to lower revenue and gross margin and an increase in operating expenses on a year over year basis.

Cash Position

Cash and cash equivalents were $72.9 million as of March 31, 2022 compared to $57.1 million as of December 31, 2021.

Fiscal 2022 Outlook

The Company withdrew its previously announced annual revenue, gross margin, operating expense, and adjusted EBITDA guidance on April 6, 2022 given the diminishing virulence of COVID-19 and the reduction of seasonal hospitalization patterns related to flu and RSV in the first quarter of 2022.

The Company is reinstating annual revenue, gross margin, and operating expense guidance for fiscal 2022.

For fiscal 2022, net revenue is expected to be in the range of $81 million to $86 million. In developing this revenue guidance, the Company did not include the impact of any future COVID-19 surges for the remainder of the year. The Company also factored in an increase in respiratory census from the low levels seen in March and included the return of a modest flu and RSV season by the fourth quarter of 2022. The Company’s current revenue guidance is lower than the Company’s revenue guidance as provided on February 24, 2022 due to the elimination of revenue from a second COVID-19 surge and the reduction in respiratory census seen in the first quarter of 2022 given the decreases in flu and RSV versus prior pre-COVID-19 comparable periods.

For fiscal 2022, gross margin is expected to be in the range of 34% to 36%.

For fiscal 2022, GAAP operating expenses are expected to be in the range of $99 million to $102 million.

For fiscal 2022, operating expenses excluding depreciation, amortization and stock-based compensation expense are expected to be in the range of $86 to $88 million.

Conference Call

Management will host a conference call at 4:30 p.m. Eastern Time on May 4, 2022 to discuss the results of the quarter with a question and answer session. To listen to the conference call on your telephone, please dial (833) 714-0922 for U.S. callers, or +1 (778) 560-2684 for international callers, approximately ten minutes prior to the start time and reference conference code 6179275. To listen to a live webcast, please visit the Investors section of the Vapotherm website at: http://investors.vapotherm.com/events-and-presentations/events. The webcast replay will be available on the Vapotherm website for 12 months following completion of the call. A replay of this conference call will be available by telephone through May 11, 2022 by dialing (800) 585-8367 in the U.S. or +1 (416) 621-4642 outside of the U.S. The replay access code is 6179275.

Website Information

Vapotherm routinely posts important information for investors on the Investor Relations section of its website, http://investors.vapotherm.com/. Vapotherm intends to use this website as a means of disclosing material, non-public information and for complying with Vapotherm’s disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of Vapotherm’s website, in addition to following Vapotherm’s press releases, Securities and Exchange Commission filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, Vapotherm’s website is not incorporated by reference into, and is not a part of, this document.

Non-GAAP Financial Measures

This press release includes the non-GAAP financial measures of EBITDA, Adjusted EBITDA and operating expenses excluding depreciation, amortization and stock-based compensation expense, which differ from financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). EBITDA represents net loss less interest expense, net, provision for income taxes, and depreciation and amortization, and Adjusted EBITDA represents EBITDA as adjusted for the impact of foreign currency loss or gain, change in fair value of contingent consideration, and stock-based compensation expense. 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 2022 financial guidance regarding operating expenses, excluding depreciation, amortization and stock-based compensation expense. 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 Adjusted EBITDA principally as a measure 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 this measure is useful to investors as supplemental information because it is 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 this 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 definition of Adjusted EBITDA is 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 3.5 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 noninvasive ventilatory 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 Precision Flow system’s 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 plan to get its business to profitability by delivering 20% year over year revenue growth beginning in 2023, accelerate gross margin improvement by moving its manufacturing operation to Mexico, and normalizing its operating expense spend to pre-COVID levels and its expected net revenue, gross margin and operating expenses for fiscal year 2022. In some cases, you can identify forward-looking statements by terms such as ‘‘expect,’’ “continue,” “plan,” “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 2022 financial guidance; risks associated with the move of its manufacturing operations to Mexico; Vapotherm may need to raise additional capital to fund its existing commercial operations, develop and commercialize new products, and expand its operations; Vapotherm’s dependence on sales generated from its Precision Flow systems, competition from multi-national corporations who have significantly greater resources than Vapotherm and are more established in the respiratory market; the ability for Precision Flow 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 the COVID-19 pandemic on its business, including its supply chain, 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, 2021, as filed with the Securities and Exchange Commission on February 24, 2022 and Vapotherm’s most recent Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 as filed with the Securities and Exchange Commission on May 4, 2022, and in any subsequent filings with the Securities and Exchange Commission. 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.

Financial Statements:

Non-GAAP Financial Measures

The following tables contain a reconciliation of net loss to Adjusted EBITDA for the three months ended March 31, 2022 and 2021, respectively.

(unaudited)

Supplemental Operating Metrics

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