Q2 2021 Vapotherm Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to day repo firm.
Second quarter 291 Financial result conference call as a reminder, this call is being webcast live and recorded.
It is now my pleasure to introduce your host Mr. Mark Klausner of last week.
Go ahead Sir.
Good afternoon, and thank you for joining us for the <unk> second quarter 2021 financial results Conference call.
Joining us on today's call are <unk>, 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.
Access the webcast. Please visit the events link in the IR section of our website <unk> Dot 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 our current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated including those identified and the risk factors section of our annual report filed on form.
10-K for the year ended December 31, and 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 32021, which were filed with the SEC on May.
5.2021 and August 9 for 2021, respectively, and and any subsequent filings with the SEC.
Such risk factors may be updated from time to time and 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.
Reconciliations of these non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available and the earnings press release on the Investor Relations portion of our website.
With that it's my pleasure to turn the call over to <unk>, 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 and 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.
<unk> was another strong quarter for April sorry.
We generated $20.6 million and revenue and increased our worldwide installed base by nearly 1200 units to over 32000 units.
The majority of this increase was driven by our international business as COVID-19 was still prevalent and some areas outside the U S.
Notably Latin America.
We rebranded H D E and digital health and as people sort of access and prepared to launch our books from access post care offering.
Lastly, we hosted our first ever Investor day, and our extra New Hampshire headquarters, where we share more about our strategy products and financial goals for the business.
Our objectives for 2020..1 remained the same 1 ensure the current installed base as productive to grow the installed base 3 launch H B T 2.0, and for established our digital business.
These 4 objectives will guide us towards our goal of becoming day 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 as productive.
On that front are 1 hospital, 1 day or 1 H..1 day strategy is focused on training and educating customers on our technology's ability to treat both hypoxic and hyper cabinet patients.
As part of the strategy, we actively engaged our E. D speakers Bureau to educate our customers on how to use on technology on all patients and to share their positive experience with high velocity therapy, especially with hyper Catholic patients.
As John will share with you U S disposable utilization rates were lower in <unk> than our historical average.
This is due to 2 main factors.
First we increased our installed base by 65% over the past 5 quarters and as we expected it will take time for our customers to get up to speed on other non COVID-19 applications for our technology.
While the overall U S disposable utilization rate for QQ was below historical averages and disposable utilization rate for our top 200 U S customers was at or above the historical disposable utilization rate and <unk>.
In addition, 93% and these accounts placed orders for <unk> and all but a few of the remaining accounts placed orders and 3 Q after burning off larger purchases made for <unk>.
This gives us confidence that our 1 H 1 day strategy is working and we'll be able to achieve historical turn levels across the entire customer base post COVID-19.
Second U S respiratory sensus 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 patient staying away from the hospital as a result of Covid related fears.
Overtime, we expect that these patients will return to the hospital.
While respiratory census was down 20% and <unk> as compared to 2019, our U S. Disposable revenue grew 18% over the same period, which gives us confidence that we'll be able to grow our business and the mid teens post COVID-19.
We're also focused on building, our strong base and clinical evidence and working to be included and additional society guidelines are hyperactive study designed to further support our ability to treat hyper Catholic patients now has 4 centers trained and is enrolling patients.
Our U S field team is educating our customers on the recently issued a cow study published in Argentina, which focused on hyper Catholic patients.
I'm pleased to report that high velocity therapy was included in the a a rfps recently issued safe and effective staff and guide.
As a result, our technology will receive the same productivity credit is bipap, and CPAP, which eliminates a potential barrier to the adoption of our technology.
These guideline changes and study results serve as important resources and our 1 H 1 day educational efforts.
We are working to increase revenue per installed unit through the introduction of new products like our oxygen assist model for AUM.
AUM is now available in 18 countries and also includes subscription based revenue, which increases the recurring revenue per installed units.
We are pleased with the year to date results from our own launch and the U K 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 for both existing and new accounts by leveraging our expanded sales force and the U S and select international markets.
And the U S. We grew our installed base for nearly 300 units and added 12, New E D gold and silver accounts and to Q.
And we saw roughly 2 thirds of this installed base expansion coming from existing accounts with 1 third coming from new accounts at.
And at the end of 2 Q, we were and nearly 500, EDI gold and silver accounts from the U S.
Internationally, we grew our installed base by over 900 units largely driven by high rates of COVID-19, Hospitalizations and Latin America.
Our third objective is to launch H B T 2 point out worldwide.
H B T 2.0 has its own built and air source, which will allow us to break free from the need to be connected to a hospital's piped and air.
Our initial focus with H B T..2 porno will be on the hospital market, where we have and existing customer footprint.
We expect to initiate a worldwide limited market release later this year.
And we'll also use the limited market release to learn how our HPT 2.0 might be able to help patients and new care settings, including the home and E. M. S settings, as well as how we can and integrated with vapor from access.
Our final objective is to establish our digital business now branded vehicles from axis.
Our initial product vehicles from 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 out fine on its entire book of CMS business.
And 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 eat and.
And silver E D accounts with significant COPD patient discharge volumes and will focus on preventing or reducing C. O P. D readmissions.
We will learn from this new product launch as we expand our April time access offerings beyond post care.
Overall, I am very proud of our success and the first half of 2021.
Our team continues to meet the needs of our customers each day, and a dynamic market and I am very excited about what <unk> and the remainder of the year holds for our business and.
After John details our financial results I'll spend some time outlining our focus for <unk> and the remainder of 2021 Johnny.
Thank you Joe.
As mentioned revenue and the second quarter of 2021 was $26 million compared to revenue of $35.2 million and the second quarter of 2020 and $12 million and the second quarter of 2019, a 2 year compounded annual growth rate of greater than 30%.
Recall, the second quarter of 2020 was our first full quarter of COVID-19 related demand.
U S revenue was $11.3 million compared to the second quarter of 2020 revenue of $25.7 million inter.
International revenue was $9.3 million compared to second quarter of 2020 revenue of $9.5 million.
Capital revenue was $6.2 million and the second quarter of 2021 compared to $21.5 million and the second quarter on 'twenty 'twenty.
Worldwide capital revenue decreased year over year due to the significant COVID-19 related demand, we experienced and the second quarter of 2020.
And the second quarter of 2021, we sold 1300 P up units worldwide versus 3900, and the second quarter of 2020, which was driven by significant increases and COVID-19 related hospitalizations.
U S capital revenue was $2.7 million compared to $16.1 million and the second quarter of 2020 International capital revenue was $3.5 million compared to $5.3 million and the second quarter on 2020.
Disposable revenue was $12.8 million and the second quarter of 2021, representing a $400000 decrease over revenue of $13.2 million and the second quarter of 2020.
And the second quarter of 2021, we sold roughly 138000 disposables worldwide versus a 139000 and the second quarter of 2020.
While the total number of disposables sold was nearly flat there was a much higher concentration of international disposable sales and the second quarter of 2021.
International average selling prices are lower than in the U S. As we largely have the distribution network to serve the international markets.
U S. Disposable revenue was $7.3 million compared to $9.4 million and the second quarter and 2020 due to a year over year decrease and COVID-19 related hospitalizations and lower respiratory sensus and <unk>.
National disposable revenue was $5.5 million compared to $3.7 million and the second quarter of 2020 due to significant COVID-19 demand and Latin America.
Worldwide service revenue was $1.7 million and the second quarter of 2021 compared to 539000 and the second quarter of 2020.
The increase and worldwide service revenue was due to bake with her and access related revenue and an increase worldwide installed base of precision flow units.
Our worldwide installed base grew by approximately 200 units and <unk>.
As of the end of the second quarter. Our installed base consisted of approximately 32000 units, reflecting 45% year over and get growth.
And the installed base growth was driven by an increase in Latin America, and Brazil, and particular as they faced elevated COVID-19 hospitalization levels going into winter.
Our monthly U S disposable utilization rate for the second quarter of 2021 was 1.05 as compared to 2.15 and the prior year and 183, which was the average disposable utilization rate for the second quarters of 2017 or 2019.
The U S disposable utilization rate decreased year over year due to several factors, which Joe addressed in his comments.
First our installed base expanded significantly due to COVID-19, which resulted in an influx of patients who are hypoxic, meaning they cannot get enough oxygen and their system.
As expected it will take time for these newly installed units to become fully productive and we are especially focused on educating on new customers on how our technology works with hyper cabinet patients like COPD patients, who often have difficulty carbon dioxide from their system.
And second to Q U S Hospital census, as measured by respiratory related discharges was over 20% below the respiratory related discharges for the second quarter of 2019, we believe this reduction and respiratory related discharge and it was due to near zero flu and RSV levels and the fear of being exposed to COVID-19, and the hospital.
We expect these patients to return to the hospital over the long term.
Despite a 20% decrease and respiratory centers are U S. Disposable revenue grew by 18% and the second quarter of 2021 as compared to the second quarter of 2019. This gives us confidence that we'll be able to grow our business and the mid teens post COVID-19.
The monthly international disposable utilization rate for the second quarter of 2021 was $2.2 9 as compared to $2.7 zero and the second quarter of 2020 and 2 for 5 which was the average disposable utilization rate for the second quarters of 2017 through 2019 the.
International disposable utilization rate decreased year over year due to our significantly expanded install base and.
And in the U S. It will take time for these newly installed units to become fully productive.
Gross profit and the second quarter of 2021 was $9.4 million, a decrease of $8.2 million over gross profit of $17.6 million and the second quarter of 2020 gross margin was 45, 6% and and second quarter of 2021 compared to 51% and the second quarter of 2020.
The decrease in gross margin is primarily due to overhead and labor absorption as production returned to normalized levels and to a lesser extent, a shift and revenue mix to international revenue.
The decrease in gross margin was partially offset by higher disposable revenue relative to the second quarter of 2020.
Operating expenses were $26 million and the second quarter of 2021 and increase of $1.6 million over $24.4 million and the prior year. The increase in operating expenses was primarily due to an increase and research and development and general administrative expenses, partially offset by reduced sales and marketing expenses.
Loss and the second quarter of 2021 was $17.3 million or <unk> 67 per share compared to a loss of 8 million or <unk> 35 per share and the second quarter of 2020.
Adjusted EBITDA loss for the second quarter of 2021 was negative $12.3 million compared to negative $4.3 million and the second quarter of 2020.
The increase and adjusted EBITDA loss was primarily due to a reduction in revenue on a year over year basis.
As of June 30th 2021, cash and cash equivalents were $81.5 million compared to $93.8 million as at the end of March 2021, and $113.7 million as of December 31, 2020.
And the second quarter of 2021, we used cash of $12.3 million of which 2 million was used to pay down principal on our line of credit.
In terms of guidance recall that where you're only providing annual guidance.
Based on our results through <unk> of 2021, and our expectations for the full year. We now expect full year revenue to be between 85 million and 91 million, which represents an increase of 83% over 2019, and a 2 year compounded annual growth rate of 35% at the midpoint of this range.
This new revenue guidance reflects an update from previously issued full year revenue guidance of $82 million to $88 million.
This full year revenue guidance reflects the impact of COVID-19 that we've seen so far and early <unk>.
As previously communicated we expected like capital sales and the second half of the year due to reduced capital budgets. However, we are currently seeing increased demand for our capital units and disposables and certain U S geographies due to COVID-19 Verenex.
Therefore, we expect to see near similar worldwide revenue levels and the third quarter as he did and the second quarter driven by COVID-19 demand and the U S. While we expect international revenue to grow about 30% over the third quarter of 2019 day.
Just on what we've experienced in previous COVID-19 searches on the potential impact of masks mandates and return of social distancing our guidance assumes lower worldwide revenue and the fourth quarter and on the third quarter, which is the opposite of what we typically see.
It continues to be difficult to predict the timing duration and impact of COVID-19 on hospitalization and around the world and to the extent the impact of COVID-19, deviates from our expectations, our full year revenue forecast would be impacted.
We continue to expect full year gross margin to be between 26% to 48% and we now expect full year operating expenses of $99 million to $102 million and increase from previously issued operating expense guidance of $97 million to $99 million due primarily to investments and are based on access offering.
On our Investor Day, we also introduced long term financial goals, we intend to grow our revenue annually and the mid teens, resulting in revenue doubling over the next 5 years and improve our gross margins to 65% over this 5 year timeframe.
This concludes my remarks, I'll now turn it back over to Joe.
Thanks, Johnny.
Before sharing our <unk> objectives, and I'd like to share with you some of the highlights from our chief commercial officers extended U S Shield travel.
As soon as our Investor Day was completed Greg Remand spent 3 weeks on the road visiting customers and his.
Key findings for confirmation of the following.
First customers, who purchase large quantities of Pf units during COVID-19 have been focused on how to use them in the current environment.
They've been allocating these units to areas of the hospital beyond the E D and have requested training for these other specialties with a particular focus on how to treat hypercapnia.
Second our medical education efforts are working and we're seeing increased usage on hyper Catholic patients due to this training.
Lastly, several hospital shared with him and if they are actively looking to reduce COPD readmission rates and we're interested in learning more about vehicles from access post care.
As we look ahead to <unk> and the remainder of the year, we will place heavy emphasis on ensuring our installed base and as productive through our 1 hospital..1 day program, we will educate our customers on how our technology treats both hypoxic and especially hypercatalectic patients throughout the hospital.
We will also educate our customers on the arc's newly issued safe and effective staffing guide and which we now received the same productivity credit as Bipap and CPAP.
We will develop clinical evidence like the hybrid act study demonstrating our ability to treat hyper cabinet patients consistent with the outcomes, we saw and the Doshi E D randomized control trial.
E D RCT subgroup analysis, and recently issued paper by Dr. Platt and account from Argentina.
To increase our recurring revenue per installed unit, we will drive AUM adoption in the U K EU and Middle East we are working on quantifying ohms economic value to potentially pursue additional reimbursement and the U K and other EU markets.
We'll work with the FDA through the breakthrough devices program to clear 1 and the U S. As previously announced our I D E and clinical study was approved by the FDA and we are working closely with the study sites to ensure the study runs and smooth as possible.
We expect to begin enrolling patients in this clinical study and the near future.
We will grow our worldwide installed base and prepare for the limited launch of our new <unk> 2 point on our platform and the second half of 2021.
Finally, our sales team will be introducing the newly launched April term access post care product to our gold and silver EDI customers. We're.
We're looking forward to hearing our customers feedback as we refine and develop this product.
Based on some access post care will also connect us more directly with COPD patients, which will provide important information on their needs and both the inpatient and home setting.
Before closing I would like to share the following patient story, which came to me from 1 of our field team members and <unk>.
And I spent the morning educating the clinicians on high velocity therapy, while there for EDI respiratory therapist got a call for a bipap unit for a hyper capex COPD patients she.
She didn't know what any of those numbers were and I asked her if I could come down with the vapor from unit and talk to the physician and she agreed.
We spoke to the position and he told us that patients C. O..2 was high at 75 is respiratory rate was elevated at 35. He was confused a little combative and was a very big Guy.
The Doctor agreed to let us put this patient on vehicles there.
When we started them on high velocity therapy I told her we could leave the bypass outside the room and probably wouldn't need it.
After we put the patient on our technology and nurse came in and asked me to explain how it works within 5 minutes for patients sat up and open designs and asked where he was the nurse was shocked and how quickly. It works I went back about 40 minutes later to check on the patient and he was sitting up and embedded asking for is breakfast in the meantime, the Archie.
And the Bipap unit back and the closet.
In conclusion, I'm very proud of the efforts of our entire organization put into <unk> to ensure we met our customers' needs worldwide I am confident that with this good start to the first half of the year and our teams tremendous work ethic, we will accomplish our 2021 objectives. We're excited about the opportunity to drive further adoption of our high velocity third.
For both hypoxic and hyper capex patients and all areas of the hospital and prepare for our move into the home care setting.
Thank you for trusting us with your capital we appreciate it now.
Now I'd like to open it up for questions.
Thank you for reminder, to ask that question and you would need to price for 1 on your telephone and do we try your question Ross step on key again, if he would like to ask the questions of depressed for that and number 1 on your telephone keypad. Please stand by while we compile the Q&A roster.
First question comes from the line of Bob Hopkins from Bank of America. Your line is open and you may ask your question.
Hi, there. Thank you for taking the questions, it's Brad Bowers on for Bob today.
So I really appreciate all the color you gave on the disposables and the corner you know understand that it might have been a little lighter but.
Just want to know should.
Should we think of it says as a floor for maybe the utilization going forward. I mean, you have COVID-19 coming out people getting vaccinated and you don't really have the rise of the delta and the quarter. So is that the right way to think about it.
Hey, Brad it's John.
Thanks for your question today, so and in terms of where we were Brad as we think about the quarter.
And when we look at the installed base growth that we saw there over that period of time last 5 quarters and grew about 65% and 1 thing we saw there is that the.
<unk> D.
The utilization and the quarters about 1 point on 5 versus what we saw previously of $1..9. We also saw respiratory census down about 20% as compared to the second quarter of 2019. So I guess when you think about it in terms of the floor.
I'm not sure that we'd see respiratory census decrease much more I think we saw and pretty much near zero flu very low RSV.
And in addition, we saw a lot and COPD patients staying away from from the hospital so from a P.
So our numbers perspective of patients entering the hospital, we say may not be the absolute low point, but it is pretty low from a from a census perspective for patients that would be eligible to treat.
Got it that's helpful. And then just 1 more follow up if you don't mind. So I. Appreciate you are giving some color on Q3, given all the noise and the year that'll help out with modeling so, but just thinking about what that kind of implies for Q4, I mean that implies.
Almost almost flat for the rest of the year I think I'm doing that right.
Honestly, you'd give or take a little bit.
And Q3 here, but just wanted to understand what your assumptions are maybe for Q4 on utilization.
I would imagine that it's not as much on capital and it would be on some of the disposables coming back in queue for us, but it doesn't really seem to the guy that doesn't seem to imply that so just kind of wonder what your thoughts were there. Thank you.
Sure Brad So in terms of the concentration of fourth quarter from a capital perspective, we'd expect and the U S. Our assumption is that the capital would be.
Particularly in the U S pretty light.
And for that fourth quarter and again, what we've seen in previous searches is once for surge comes through then typically it's a slow period. After that after typically a 60.90 day window. So we wouldn't expect much and the way of capital on the fourth quarter.
And we would see.
Elevation on the disposables.
And the fourth quarter assumptions.
Assumption is and probably be a little bit above what we've seen here and the second quarter.
As we do go into.
Blue season, as we do go into RSV season, as Kids go back to school and the like.
So that's how we're thinking about it and.
And what we've typically seen as fourth quarters, typically large and third quarter here, we would expect to see third quarter and larger than the fourth quarter.
Coming out of the year.
Thank you.
Your next question comes from the line of Margaret Kaiser from William Blair. Your line is open.
Hey, guys. This is maggie on for Margaret.
And.
A question on.
Kind of like that for your guidance implies so are there any assumptions for the flu or RSV and particularly in the fourth quarter and that full year guide are there mainly just that kind of a 19 if that percentage and then how are you guys thinking about the impact and the player as we head into the back half for 'twenty, 'twenty, 1 and into 2020.2.
Sure Maggots and thanks.
Thanks for question today in terms of.
Third quarter and you know, we're looking at that as a quarter.
Largely and.
And the U S and particular driven by some of the Covid demand that we're seeing in certain geographies and the U S, particularly in the southern part of the U S that we're reading about and the news here recently and again as we've seen and other searches. It's typically a 60 day 90 day window before.
Before we start to see it subside so on the fourth quarter, our assumptions that we will see that happen again here and in particular.
Thinking about modest flu season, and modest RSV season.
Given the introduction of a reintroduction I should say of mask wearing and potentially social distance and here in the fourth quarter as we adjust to the increase here and COVID-19 cases and the U S.
Yeah.
Great. Thanks, that's helpful. And then if I could just ask 1 more just maybe on 2020 to kind of look on them.
At the disposable turn rates. So I know you guys have talked about on these turn rates being lumpy or particularly in 2020, 1 and just kind of with what we thought on the second quarter and do you expect this lumpiness to continue as we head into 2000 and try to how can we think of that particularly as you look to lines and the H b.
And he can you point out thanks, so much.
Sure Maggie as we think about disposable utilization rates.
And our experience is that it would probably be continue to be lumpy lumpy period of time until we can get beyond COVID-19 and Covid normalizes out.
And from our expectation perspective, we think it would probably be about 4 to 6 quarters a period of time for us to work through.
Our installed base work through educating all of our net new customers on full use of our technology across all use case settings, whether its hypoxic or hyper cabinet patients I think as we look at the success. We've had here and the top couple of hundred accounts and the U S and which we were able to educate those customers and we saw that their churn rates.
We're at or above historical levels and the second quarter as we continue to educate customers beyond the top 200, and we're confident that over the long term, we'll be able to get those utilization rates back to historical levels and again for 6 quarters, probably about the time frame, we think to get there post COVID-19 and stabilization.
Okay, great. Thank you.
The next question comes from the line of somebody on Slavonic from Canaccord. Your line is open.
Hi, John Young on for Bill Tonight, Thanks for taking our question.
Maybe just touch on what Youre seeing right now in Q3, we've been hearing from clinicians that this wave of Covid, it's much different than the previous wave specific rate younger patient demographic.
Do you think that.
Packed for utilization.
Based on technology.
Mhm.
Yeah, Hi, John and Thanks for question Tonight in terms of what we're seeing now is we're seeing the COVID-19 a variant to your point.
Impact.
Of all ages, and including younger people, whereas and some of the previous weighted as more older patients more vulnerable patient populations.
In terms of what we're seeing now is its impacting and particular specific geographies here and the U S.
The Florida, Louisiana, Texas across the across the Southern U S.
At this point in terms of what does it mean for adoption or utilization and the technology I think and probably be.
Depending upon where COVID-19 hospitalizations track and trend I think it would probably be fairly similar.
Technology applies to patients of all ages suffering and respiratory distress. So we have the capability to support any patient who presents and emergency department and respiratory distress. So I think depending upon where COVID-19 hospitalizations go will and large part.
<unk> and.
On the utilization here and in third quarter.
Great. Thanks, and just a follow up question I believe you were in and limited market release for a day for access and the quarter any early lessons from that when that market or at least and fight for the full market release. Thanks again for taking my questions.
And I think I can pick that when and if you want.
So.
I think what we've learned is.
And we're learning is that the hospitals, particularly our 500 gold and silver P. D accounts.
It seemed to be quite interested in this solution. This is a real problem for them.
Knocking that readmission rate down under the National average is a pretty important problem and this is a very unique solution to bring that.
So you know you're on.
And so we're running into the.
The challenge of helping device people learn how to sell a service and we were lucky and that we've got a few of our folks on that field team that came from that background and so that's helping a lot. It was great to have all of those folks together and personally and Chicago here earlier in the earlier in the quarter and watching them and really learn this and.
Digest it but I think what we've learned is that this is a this is a solution or this is a problem that those hospitals are really looking for a solution and what we really like about it is and the fact that were already treating these patients with our high velocity therapy. These hyper Catholic patients as well as hypoxic when they come and the E D.
And so it's a really nice fit all the way around.
Thanks, Joe and John.
Next question comes from the line of Maria T bolt from B T. I G. Your line is open.
Hi, Joe and John Thank you for taking the questions.
And like to ask my first here and maybe it's a 2 parter on the training and education process I heard those stats about the top 200 accounts and the higher utilization and seen with those accounts. So I'm curious about how long that training kind of took to kick in and for those accounts and and you know you know when you start to see sort of that that that improvement.
And that tipping point for those accounts.
And secondly, how we should think about the delta variant or feature variance sort of impacting your training efforts and I'm wondering if hospitals are starting to shut down access or asking you to put these things on pause so any updates there would be great.
So and Murray that's a that's an excellent question and it's 1 of them candidly, it's a source of frustration for me because.
Second quarter was a quarter, where it was pretty clean and our people were back and these accounts and we had them all focused on those top 200 accounts run and 1 H 1 day and it will work.
And that gives us a great deal of confidence when we look at that about how this play is going to work in total when we run it through the rest of the book.
But you know you're you're spot on and when you mentioned this.
Delta variant is closing down our access.
It is moving us back away from being able to be and these accounts every day and supporting them as they learn how to use it on non COVID-19 patients, but listen I'm not going on I'm not going to complain about that because the faster we can grow net installed base. The bigger this business becomes and the and the medium to longer term.
So it will 181, H, 1 day works and and typically you're going to see results pretty pretty soon.
Around this when from the time you go in there and do your 1 age 1 day, you're beginning to see them use it on other types of patients pretty quickly.
But it is frustrating that you know we are now back into a situation, where we're really focused on supporting all of our accounts, who are dealing with the COVID-19 surge and making sure that we can meet every demand every every need that they have.
Our next question comes from the line of Chase on Bednar from Piper Sandler Your line is open.
Hey, guys and thanks for taking the questions. A couple for me today I'm going to skip over 2020..1 here for a second and you gave some other forward looking commentary here and it and putting around the ability to grow mid teens and gross margins that should be about 2020 levels.
And I wanted to confirm that that the mid teens comment was a company wide comment I think from from Euro and even though I think you're referencing disposables growth there and the period.
Just in terms of how you're thinking about the business as we normalize beyond 'twenty..1. So just wondering if I have that correct and how you're characterizing that point and and then on the gross margin side and how much how much of that margin upside versus 2020 is volume dependent.
Vs and what might actually be within your control to make production more efficient and pull out costs.
Yeah, Jason Thanks for the question Snyder John here in terms of our ability to grow the business and going.
Going forward, Yes, I think mid teens is on the overall business itself I think our long term guidance and we provided at Investor day was for.
<unk> percent for year on compounding and growth rate doubling the business over a 5 year window. So we feel good about that.
We like what we've seen in the U S accounts.
Training educating those top 200 accounts, especially and continuing to go deeper and wider there.
In terms of the gross margin improvement as we look at it going forward I think a lot of it is.
Within our control I think we have levers all of the levers are and play Jason to continue to drive that gross margin going forward I think with new product introductions, we have on the horizon here the ability to drive average selling prices up.
On the incremental.
Clinical economic and utility that were providing these customers.
And 2 the ability to reduce cost as we have redesigned and and worked on the design of these new products for continued improved quality as well as cost reduction through ease and manufacture ability and then the last 1 is the overhead utilization to the extent that we normalize out production over the longer term that.
Ever in terms of being able to drive down the overhead rates per unit still is in play as well. So all 3 levers are intact going forward, Jason to get to that 65% level.
Longer term I think 2022, I think we will have a.
And the ability to again move back above the.
21 levels and at and above the 20.
<unk> by really driving the production volume and driving volumes.
After a sequentially reduced sales and production volume year in 2021 versus 2020.
Alright got it that's helpful. John and thanks for that and then just to come back to the to the Opex guide for for this year and you do have some incremental spending dollars that are going towards day, both their Max us Matt It looks like some wise incremental spending that you're doing there to.
To fund that initiative.
Wondering if you could expand more and maybe on just where those dollars are being targeted or these people costs infrastructure costs and product for software development costs.
And then how are you thinking that the ROI.
Or for the incremental spending on baseball from access maybe relative to some of the other product development efforts that you guys have undertaken here. Thanks.
Sure Jason Yeah. Good question, so as we think about the investments we're making.
On a lot of it.
You touched upon all of the areas I think across the across the board in terms of.
Building out the infrastructure necessary to deliver that post care access to these patients and a hospital based setting.
And making sure that we have all the infrastructure backbone are available to support those patients and clinicians as.
And as well as on the marketing initiatives to broaden the message around and they put their Max's post care and what it means to a hospital from a patient outcome and potential economic outcome as well. So I think it's sort of evenly split between those as we think about the ROI.
We look at that as it and new product introduction.
And very favorable.
Downstream ROI implications for us.
And at least on par with our next generation platforms and.
And there'll be some potential investments that we need to make to drive it but we're excited about what it can do for our business from a top line.
Perspective.
Downstream, which is why we made a conscious decision to make the investments and Dave with arm access post care this year.
Alright, thanks, so much.
You're welcome Jason.
You have a follow up question comes from the line of Maria T Boss on T V. P. I G. Your line is open.
Alright. Thank you wanted to try to sneak in a follow up here on international and I look at the installed base and about a third of your units now are placed internationally and I wanted to hear a little bit about stickiness.
From a stickiness and some of that and I know, we focused a lot on the U S. Today, but you know what sort of training efforts are you putting in there what sort of investments are you, making and your field teams to try to ensure that P. F units are used.
Outside of Covid going forward. Thanks.
Thank you Maria.
And actually question and many of the same plays that we're running and the U S. Around 1 percentage when D with a focus on hypercalcemia, we're running them through our direct businesses in Germany and in the UK.
Through the dealer model, we are providing more materials. We also have clinical people on the ground and a number of these markets, including Brazil and Mexico for example.
And have people on the ground and the middle East and and and other parts of Europe and now we have people on the ground and Japan.
And so our goal is to provide clinical support on the ground to our dealers and continue to share that those best practices that we developed and other places, but it's it's basically the same place we're running it through dealers.
Alright, very good thank you.
There are no further question at this time I would like to turn the conference back to Mr. Joe Army for closing remarks.
Thank you very much on I want to thank you all for your interest and vapor <unk>, we really appreciate it and we look forward to updating you on our progress again next quarter and have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect.
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