Hello, and welcome to the Vapotherm, Inc. First Quarter Financial Result Conference Call. If you would like to ask a question during this time, simply press star one on your telephone keypad. I will now turn the conference over to Mark Klausner. Please go ahead. Good afternoon, and thank you for joining us for the Vapotherm first quarter 2023 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. 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, 2022, and Form 10-Q, which will be filed today, and then 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 the historical 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 Vapotherm's President and Chief Executive Officer, Joe Army. Thanks, Mark, and thank you all for joining us. On today's call, I will review the progress we made during the first quarter, and then John will review our financial performance before I provide my thoughts on the balance of 2023 and turn to Q&A. We had a solid first quarter as we continued to execute against our Path to Profitability initiatives. Gross margins continued to improve. Cash operating expenses continued to decrease. We significantly decreased our inventory balance. We successfully began production at our Mexico facility, and demand for our HVT 2.0 platform was strong, with large fleet sales to major hospital systems and a robust pipeline entering the second quarter. Starting with revenue, despite the challenging capital equipment environment, capital revenue increased 28% over fourth quarter 2022 as we're seeing strong HVT 2.0 adoption. Customers are recognizing the value of this technology. It's intuitive, easy to use, and since it has its own air source, can be used throughout the hospital. In the quarter, HVT 2.0 has accounted for 2/3 of total capital sales in the U.S. in just our third quarter of commercialization. Turning to our gross margin improvement initiatives, I'm pleased to report that our Mexico facility is fully operational and we're building and shipping product. All our cost assumptions related to the move, including overhead, labor, and materials, are tracking in line with our expectations, and we're starting to see the positive impact on our reported gross margin. During 2022, we took the steps necessary to return our non-GAAP cash operating expenses to pre-COVID levels. During the first quarter of 2023, we maintained our focus on expense control and as a result, cash operating expenses continued to decrease. As a reminder, first quarter OpEx is typically the highest of the year due to expenses such as our annual sales meeting. During the quarter, we took a number of steps to bolster our balance sheet, including the closing of a PIPE transaction and the conversion of inventory to cash, ending the quarter with approximately $26 million in cash. We continued to make progress on converting excess inventory to cash, and during the first quarter, reduced inventory by approximately $5 million. I will now turn the call over to John, who will review the financial results for the quarter. Thanks, Joe. Worldwide revenue in the first quarter of 2023 was $17.7 million. U.S. revenue was $13 million. International revenue was $4.7 million. Capital revenue was strong as HVT 2.0 capital sales represented 68% of our capital sales in the U.S. and over 50% in our direct international markets. Gross margin was 35% in the quarter, which is up from 27.5% in Q4 2022 despite near-term inefficiencies as we ramped up production in our Mexico facility. We estimate these inefficiencies and final setup costs negatively impacted gross margin by approximately 3% in the quarter. In addition, all the higher cost of legacy disposables inventory has been burned off, which will result in lower cost disposables hitting the P&L beginning in Q2. GAAP operating expenses were $19.8 million in the first quarter, down from $22.8 million in the fourth quarter of 2022 and $27.8 million in the first quarter of 2022. Non-GAAP cash operating expenses were $16.4 million in the first quarter, down from $18 million in Q4 2022, which is notable as the first quarter is typically the highest quarter for operating expenses due to the timing of various programs such as our national sales meeting. Non-GAAP cash operating expenses have decreased sequentially every quarter since we launched our Path to Profitability initiative early in 2022, and were down from $24.3 million in the first quarter of 2022, a year-over-year reduction of $7.9 million. We ended the quarter with inventory of $28.5 million. We continue to make progress in reducing inventory from the peak of $38.4 million in the second quarter of 2022. Since then, we have decreased our inventory by nearly $10 million, with roughly $5 million of that reduction coming in the first quarter. We ended the quarter with $25.7 million of cash. Net cash burn in the quarter after adjusting for $23 million of private placement proceeds was approximately $11 million, or approximately $2 million less than Q4 2022. We expect that cash burn in the first quarter of the year will represent more than half of the total cash burn in 2023. Turning to guidance. For the full year 2023, we reiterate our previously issued guidance and continue to expect revenue of $77 - 79 million. Gross margins of 48%-50%. GAAP operating expenses of $76 million-$78 million, and non-GAAP cash operating expenses of $60 million-$62 million. While we expect disposable revenue to account for 75% of our total revenue over the long term, we anticipate that the contribution of disposable revenue as a percentage of total revenue may be slightly lower than this in 2023, given the market receptivity we have seen to HVT 2.0. With that, I'd like to turn the call back over to Joe. Thanks, John. As we look to the second quarter, our focus continues to be all about driving towards profitability through revenue growth, gross margin improvement, and maintaining operating expense at pre-COVID levels while investing prudently in future growth drivers. Before turning to Q&A, I'd like to thank our team for all their continued efforts as we drive towards profitability. We made some significant changes in 2022, and I'm very proud of how we've executed thus far in 2023 under the new strategy. As always, we appreciate your support of Vapotherm and look forward to updating you on our next quarterly call. I'll now open the call up for questions. Thank you. We will now begin the question and answer session. If you have a question, please press star one on your telephone keypad. Should you need to remove yourself from the queue, you may press star one again. One moment, please, for your first question. Your first question comes from the line of Margaret Kaczor with William Blair. Please go ahead. Hi, everyone. This is Macaulay on for Margaret. Thanks for taking our question. I guess on the first, it looks like disposables and utilization were lower than expected this quarter. Wondering if we could get any commentary on if that was gold and silver ED accounts, and how we can be sure that this is flu-related as opposed to utilization decline. Hi, this is John. I can take that question. In terms of our disposable revenue, I just see it decreased from the fourth quarter to the first quarter. The past flu season we had was a normal flu season overall, but did start and end earlier than usual, and we expected some residual hospitalizations for the flu, which didn't materialize. We came in at about 50% of the pre-COVID average for the first quarter, and our turn rate in the U.S. was about 1.1. If you look at our turn rate over the Q4 through Q1 timeframe or the duration of the flu season, it was about 60% over that period, which is what we saw in the third quarter of 2022. In terms of the gold/silver breakdown, pretty much those tracked consistent with there were no standard deviations associated with that from a tracking perspective. Great. Thanks for taking our question. Mm-hmm. Your next question comes from the line of Bill Plovanic with Canaccord Genuity. Please go ahead. Hi. Yes, this is Zachary Day from Bill. Thank you for taking the question. Regarding the gross margin cadence, on the last earnings call, you said that it should be in the low to mid 40s in the first half of the year than above 50% the second half of the year. Is that still on track, given the Mexico manufacturing launch? Thank you. It's John. I can take that question. In terms of gross margin ramp, you know, in the first quarter as we ramped up the lines, we experienced the typical inefficiencies that are seen during that phase. We believe this is behind us now, and we're scaling production as we speak. With the higher cost of disposables inventory burned off, we do expect to see improvement beginning in the second quarter and again, sequential improvements in the third and fourth quarters, as we gain efficiencies in our Mexico facility and this includes the disposables and the components that we're producing there. We also expect to see the higher ASPs from the new products also continue to grow and expand that gross margin over the course of the year. We're comfortable with our, you know, guidance for the full year in that 48%-50% range. Thank you. If I may follow up, just in regard to the previous question too. Is a 70% plus usage rate, overall, still attainable in the gold and silver accounts? You know, from a, you know, utilization perspective and recovery rate. The gold and silver counts, you know, we believe over the long term, yes, we believe that that is a recovery rate that, you know, we can achieve. We've achieved it before. You know, expect that long term that we'll be able to get those turn rates, you know, up to those levels. In particular in the gold accounts, which is a big driver of the focus for our field team, to expand into those gold accounts, which represent the majority of our business. Great. Thank you very much. Mm-hmm. Again, ladies and gentlemen, if you would like to ask a question, it is star one on your telephone keypad. Your next question comes from the line of Jason Bednar with Piper Sandler. Please go ahead. Hey, guys. Good afternoon. Thanks for the questions here. I wanted to start with the revenue guide. You know, just as within the context of 1Q, I think maybe falling a little bit short, at least relative to our model and I think our bit of consensus. Seasonally, we tend to have a step down 1Q into 2Q and 3Q, just that typical, like, spring/summer seasonality of lower respiratory issues and admissions into hospitals. Maybe talk about the confidence in hitting that revenue guide again in the, you know, just given, you know, what we've seen thus far? I'll have 1 follow-up. Sure, Jason. In terms of the consensus revenue, you know, we're confident in the full year number. We like what we've seen and the strength of the HVT 2.0 capital sales in particular. And we believe that it could potentially result in a higher percentage of our total revenue contribution this year. We believe that would be able to offset, you know, what was a, you know, flu season the first quarter that ended sooner than what we've typically seen in the past. And I think from a seasonality perspective, you know, we haven't provided quarterly guidance, but, you know, from a seasonality perspective, your, you know, observations are correct. You typically see, you know, second and third quarter, lower volumes in those quarters, especially given the, you know, lack of, you know, flu season and normal respiratory census. Then fourth quarter increases again as the flu season comes back online. You also have year-end capital purchasing, which also contributes to year-end capital equipment sales, which are typically the strongest in the fourth quarter of the year. Okay. All right. Fair enough. You know, it kind of leads into, I guess, the second part of my question here. When we think about utilization rates, and also capital purchases, I know you wanna stay away from, like, kind of intra-quarter commentary on 2Q, but I guess is what you're seeing so far is that what's giving you confidence here, John, in terms of keeping the guidance where it's at and maybe not seeing the, you know, as much of a step down here in 2Q? It just, it really feels like, again, correct me if I'm wrong, it just feels like the year or maybe even, like, you know, it's really a very fourth quarter loaded type revenue year. I guess what maybe what went into this decision not to, you know, maybe bring that guide down and make it a little bit more, you know, achievable or less risky? Yeah. Thanks for the question, Jason Bednar. In terms of, in terms of the full year, I think, you know, what we're, you know, seeing in the business, you know, in particular the HVT 2.0 capital sales, I think, you know, we had a good first quarter of capital sales. We're up 28% over the fourth quarter of 2022. That's, you know, in the, in the face of, you know, what we've seen, you know, tougher capital equipment purchasing cycles. Despite that, we still grew at 28%. We ended the first quarter with a, you know, really strong, robust pipeline and, you know, continue to see that build here in second quarter, Jason Bednar. That gives us the confidence that, you know, the revenue guide for the year, you know, we want to reiterate that for the full year. Okay. Fair enough. Thanks, guys. Your final question comes from the line of Marie Thibault with BTIG. Please go ahead. Hey, good afternoon, everyone. This is Sam Eiber for Marie. Thanks for taking the questions here. Maybe I can start on HVT 2.0 and, you know, certainly encouraging commentary there. You know, maybe what's helping drive some of that demand here, are customers using it to, as a platform to expand into new care areas at the hospital? You know, maybe how you think how sustainable that demand is. Thanks. This is Joe Army. I can take that one. What we're seeing is a combination of people upgrading their fleets of Precision Flow and expanding their overall fleets. We are seeing them being able to bring patients into other care areas, in fact, the general care floor. The other thing that we've noted from customers is that the ability to ambulate patients with this product is significantly better, and ambulation is a pretty big deal for them. I think the combination of those two factors, coupled with the ease of use that we're seeing in terms of people learning how to use the equipment, it's proving to be a pretty important point. We like what we're seeing with it. As John said, the first quarter, we like that a lot. There's, you know, a fair amount of capital headwinds out there we're not, you know, we're aware of that. You know, we like the pipeline we see, and we like the way that our field sales force is really taking the opportunity to bring this into some of our most important accounts. We like what we're seeing in terms of the way they're adopting it. Okay. That's really helpful. Thanks for that, Joe. Then maybe as a follow-up here, you know, you reiterated the guidance, throughout the P&L, but any timelines or updates on Adjusted EBITDA, when that might, you know, straddle break even and turn positive? Thanks for taking the questions. Yeah, Sam, we didn't provide any guidance with regards to Adjusted EBITDA. You know, I think our goals are our Path to Profitability is to, you know, exit the year going into 2024, you know, from an Adjusted EBITDA positive perspective. That's what we continue to drive towards. Great. Thanks for taking the questions. Thank you. I will turn the conference over to Joe Army for any closing remarks. Thank you all for joining us on today's call, and we look forward to updating you again next quarter. Have a nice evening. This concludes today's conference call. You may now disconnect your line.