Q3 2021 Vapotherm Inc Earnings Call
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Good afternoon, and thank you for joining us for the vapor third third quarter 2021 financial results conference call joining us on today's call are 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 web.
Cast 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 they put their own 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 the current <unk>.
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 factors section of our annual report filed on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission or F. C. C. On February 20.
For 2021, our quarterly reports on Form 10-Q for the quarters ended March 31, 2021, and June 32021, and September 32021, which were filed with the SEC on May five 2021 August 19, 2021, and November three 2021, respectively and in 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.
You laid in accordance with generally accepted accounting principles or GAAP, we generally refer to these as non-GAAP financial measures reconciliations of these 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 <unk>, President and Chief Executive Officer, Joe Army. Good afternoon, and thank you for joining us today I'll begin by discussing our third quarter 2021 results then I'll hand, the call over to our CFO, John Landry to provide <unk> financial details lastly, I will update you on our key areas of focus for the remainder of the year.
Before taking questions demand for our technology surged in the third quarter, resulting in one of the strongest quarters in the company's history in what is typically our seasonally slowest quarter total revenue was the second highest on record disposable revenue was the highest on record and our U S. Disposable turn rate was the highest.
Has been in over five years importantly, our total worldwide revenue and total disposables revenue both exceeded our performance in the third quarter of 2020. This performance is significant for several reasons first it further validates the safety and efficacy of our proprietary high velocity therapy in treating respiratory distress patients.
<unk>, who could benefit from our noninvasive ventilatory support as an alternative to intubation with thousands of hospitals across the world using our technology on a daily basis, and our rapid expansion during the pandemic the value of our high velocity therapy delivers to patients and hospitals is clear this is proven by the.
Disposables revenue growth during the quarter a trend that we havent seen throughout 2021 year to date total disposables revenue has grown 33% over 2020 and has more than doubled over the first three quarters of 2019 second our technology appears to have reached critical mass we received a ton of clinics.
Exposure since the start of the pandemic, resulting in greater awareness of our technology around the world. Our global installed base now sits at nearly 35000 more than double the size. It was 24 months ago and we are in over 500 of the top 2000 largest emergency departments in the U S. Our creativity.
Agility and focus on customers is paying dividends our ability to deliver products. During this extremely difficult period has continued to grow our reputation in the marketplace. A number of the new E D Gold and silver accounts. We won during the quarter were highly competitive situations. The fact that we delivered when others could not has been an.
[noise] element of our success and one of the reasons. We believe we are taking market share third as the COVID-19 virus continues to mutate. Many believe it has become a permanent part of the respiratory landscape much like flu and RSV, while no. One can predict what this virus will do if it continues as a chronic casual prop.
Our global Tam will expand significantly in which case, our large and growing installed base leaves us well positioned to capitalize on this trend I'm very proud of our team and our ability to deliver product and support to our customers to make sure. We can continue to do this with a much larger installed base, we significantly expanded our disposables production.
In the third quarter by establishing additional manufacturing capability in Mexico, not only were we able to increase capacity by 75%, but we're able to do so in a way that will drive gross margin improvement over the long term. We also took steps to address the labor shortages affecting the entire country, which threatened are.
To meet customer demand for disposables, we surround creative ways through that challenge, which included recruiting into other geographic areas and flying in and housing teams from across the country to staff our production lines to New Hampshire. This enabled us to staff second and third shifts, which prove crucial to our success in delivering for our customers.
Well the ebbs and flows of COVID-19 will continue to cause some near term quarter to quarter volatility in our results over the long term we are confident in our ability to successfully manage the business no matter the environment in the midst of a COVID-19 surge we will run the same play we did this quarter and focus on delivering flawlessly for our COO.
Customers, while rapidly expanding our installed base and winning new gold and silver accounts as the COVID-19 surge subsides, we will shift our focus back on a one H one day or one hospital, one day strategy in which we train and educate customers across all parts of the hospital on our technology is unique.
To treat both hypoxic and hyper cabinet patients we consider this a win win strategy focusing on satisfying high demand during surges when access to customers is limited and focusing on executing our one <unk> strategy when access to customers returned to normal levels given the significant expansion in our installed base.
For the last six quarters, we estimate it could take four to six quarters to complete our one H one day training across our entire customer base, assuming no intervening COVID-19 surges. Once completed we believe our installed base will be fully productive at our disposable utilization rates will match or exceed historical.
Eckel levels, regardless of what happens with COVID-19 in summary, we believe the combination of our superior technology White glove field support proven track record of always delivering for our customers growing suite of digital solutions commitment to high quality clinical education and alignment with our customers' mission of the best clinical outcome.
I'm at the lowest overall cost will allow us to continue to drive long term growth and established vapor as the complex lung disease patient management company I will now turn it over to John to review the financial results for the quarter.
I will then close by telling you our key areas of focus for the fourth quarter, which will set us up for a successful 2022. Thank you Joe as mentioned revenue in <unk> 2021 was $38 $1 million compared to revenue of $30 6 million in <unk> 2020, and $10 8 million in <unk> 2019.
On a two year compounded annual growth rate of 88% U S revenue was $33 million in <unk> 2021, as compared to $25 5 million and three Q2 thousand 20 International revenue was $5 2 million in <unk> 2021, as compared to $5 million in <unk> 2020, disposables revenue was $21 seven.
$10 million and three to 2021, representing an increase of $8 6 million over disposable revenue of $13 million in <unk> 2020, and three Q2 2021 U S. Disposable revenue was $19 million as compared to $10 4 million and three to 2020, while international disposable revenue was $2 6 million in both <unk> 2002.
One and three to 2020 in <unk> 2021 we sold roughly 200000 disposables worldwide versus 129003, Q2 thousand 20 capital revenue was $15 1 million and three to 2021 and compared to $16 9 million and three to 2020 and three Q2 thousand 21, we sold roughly 2400 P F.
And its worldwide versus roughly 20 703 Q2 thousand 20, you have capital revenue was $12 9 million in <unk> 2021, as compared to $14 8 million and three Q2 thousand 20 International capital revenue was $2 2 million and three to 2021 as compared to $2 1 million and three Q2 thousand 20, we believe the significant.
Year over year increase in disposable revenue compared with a small year over year decrease in capital revenue serves to illustrate the significance of our growing installed base and <unk> gold and silver accounts worldwide service revenue was $1 3 million in <unk> 2021 compared to 617003 to 2020 the increase in worldwide service revenue was due to vapor.
Access related revenue and an increase worldwide installed base of precision flow units worldwide installed base grew by approximately 2500 units in <unk> 2021 as of the end of <unk> 2021, our worldwide installed base consists of approximately 34500 units, reflecting 39% year over year growth.
Monthly U S disposable utilization rate in <unk> 2021 was $2 five six which was a record new high. Despite the fact that the third quarter is typically our slowest quarter from a disposable utilization perspective. The contacts are monthly average disposable utilization rate was 1.65 and the third quarters of 2017 through 2000.
<unk> gross profit in <unk> 2021 was $18 8 million, an increase of $3 3 million over gross profit of $15 5 million and three to 2020 gross margin was 49, 4% in <unk> 2021, compared to 58% in <unk> 2020 gross margin was negatively impacted.
By one time charges related to the transfer of certain activities to our contract manufacturer in Mexico, partially offset by increased labor and overhead absorption due to higher disposal volumes and a greater percentage of total revenue coming from the U S. Operating expenses were $31 7 million and three Q2 thousand 21, an increase of 5 million.
Over $26 7 million and three Q2 thousand 20, the increase in operating expenses was primarily due to an increase in sales commissions on higher revenue levels net loss and three to 2021 was $13 $6 million or <unk> 52 per share compared to a loss of $12 $4 million 49 per share in <unk> 2002.
<unk> adjusted EBITDA loss for <unk>, 2021 was negative $10 7 million compared to negative $8 2 million and three to 2020. The increase in adjusted EBITDA loss was primarily due to an increase in year over year expenses and slightly lower gross margins as of September 32021, cash and cash equivalents were 73.
Compared to $81 5 million as of June 32021, and $113 7 million as of December 31, 2020, and <unk> 2021, we used cash of $11 2 million of which $1 2 million was used for paying down our line of credit based on the strong results. We saw in the last three weeks of the third quarter, we now expect.
Full year revenue to be at least $106 million, which represents an increase of 120% over 2019, and a two year compounded annual growth rate of 48%. This new revenue guidance reflects an update from previously issued full year revenue guidance of at least $102 million, we expect U S revenue in <unk> 2021 to approximate.
<unk> 2021 levels based on the following assumptions first we do not anticipate any significant COVID-19 surges and for Q second we expecting like flu season in the U S based on what the southern hemisphere experienced in <unk> and <unk> and we expect RFC levels to be consistent with what we saw in <unk> third we.
Please many of our U S customers ordered more product than what they needed and <unk> and will burn with inventory down in <unk>, which is consistent with our experience in previous COVID-19 searches, we expect international revenue to grow about 25% over four to 2019. It continues to be difficult to predict the timing duration and impact of COVID-19 on hospitals.
Patients and to the extent the impact of COVID-19, deviates from those expectations. Our full year revenue forecast would be impacted we now expect full year gross margin to be between 47% to 49% an increase from previous guidance at 46% to 48%, while we expect our gross margin to decrease year over year, we see this as a temporary issue.
Due to reduced revenue and overhead absorption in 2021 versus 2020. In addition to new production capacity in Mexico will help us execute on our gross margin improvement plan and we remain comfortable and I believe that we'll be able to increase gross margin long term to 65%. We now expect full year operating expenses of at least $106 million an increase from previous.
Operating expense guidance of at least 102 million the increase in operating expense guidance is due primarily to increased sales commission on higher expected full year revenue with that I'd now like to turn it back over to you Joe.
Jobs as we move into the fourth quarter, we remain focused on our four key growth initiatives first we will ensure our installed base as productive our entire focus during this most recent COVID-19 spike was on delivering product to our customers as we move into a more normal environment, we have refocused our efforts on our <unk>.
<unk> strategy to train and educate customers on hypercalcemia second we will set the stage to increase long term recurring revenue per installed catheter unit by developing and launching new products with higher clinical and economic value in the international markets. This will be driven by our oxygen assist module.
<unk> or AUM, which is available in 21 countries. We are receiving positive feedback from customers and look to expand the installed base in the U S. Our AUM I D. E study was approved and we have begun enrolling patients in this study we expect enrollment to continue into 2022.
We will introduce <unk> to point out to the market during the third quarter. We received FDA five 10-K approval for our next generation device and expect to begin a limited market release during the fourth quarter. Finally, we are establishing our digital business now branded vehicle for them access we believe our initial prada.
Vapor term access post care will allow hospitals to lower their 30 day COPD readmission rates by allowing clinicians to remotely monitor patients on a daily basis. This monitoring will allow for early clinical intervention in the event the patient's health deviates from their unique baseline, which.
We believe is key towards keeping these patients from returning to the hospital, we trained our entire U S field team on this product in July, but we're not able to engage customers during the quarter because of the latest COVID-19 search we are now re engaging our gold and silver E. D accounts in these discussions and closing I would like to share the following patients.
Story, which came to me from one of our field team members from the West Coast and three Q and ICU patient was placed onto a bypass system with high flow nasal cannula capabilities due to low oxygen saturation levels. After contracting COVID-19, he complained about the burning discomfort and his scientists as well out of the combination.
Bipap high flow nasal cannula device, we educated in respiratory therapy staff on our high velocity therapy with a focus on our medical grade Humidifier mission. The RT soon after decided to switch the patients have April for the patient immediately praised the our team for the switch and stated that he was much more comfortable in vapor and then he wished he was.
On the therapy sooner the patients Oh, two saturation level initially dropped to 91% and then quickly rose to 96%. The RT staff was amazed at how quickly vapor or increased the patients Oh to saturation and was delighted at the patient's claim of rapid improvement in comfort the settings, we're reducing.
The next day and the patient continues to receive high velocity therapy in conclusion I'm excited about the position. We're in right now COVID-19 brought worldwide attention of aprils are allowing us to transform our business in just 18 months the value we deliver to customers and their patients has been validated on a global scale.
During one of the most challenging periods faced by the health care industry ever as we move into a more steady state macro environment, we have a huge opportunity to leverage our significantly expanded customer base to our training and education efforts as well as new product and service introductions, whether we like it or not COVID-19 is likely here to.
So we believe our market just got a lot bigger with our leading technology and massively expanded global footprint. We will continue to take share and help customers treat patients suffering from respiratory distress I'm extremely proud of what our organization has done throughout this pandemic, which has put us in the best position, we've ever been to drive growth and continue on.
The path to becoming the complex lung disease patient management company. Thank you for trusting us with your capital. We appreciate it now I'd like to open it up for questions.
Thank you very much Mr Army, ladies and gentlemen at this time, if do you have any questions or comments simply press star one on your telephone if you are joining us today using a speaker phone. Please make sure to pick up the handset before pressing star. One. Additionally, if you do find that your question has already been answered you can remove yourself from the queue by pressing star one again.
Just one moment.
Gentlemen, our first question today will come from Margaret Kaiser of William Blair.
Hey, good afternoon, everyone and thanks for taking the question.
Maybe the first one is for.
For Joe you know you're talking a lot about 181 day and I was curious if you can comment at all on the back on that pledge to utilization and those that are trained I know, it's tough to do that.
I guess, maybe even more so in those areas, where you were able to increase capital placements throughout COVID-19.
Can you give some context around any follow through of revenues because ultimately if I went out in our in stock I'm sorry. Your installed base went up massively yeah. How do you kind of take advantage of that and are you seeing that at this point yet.
Well Margaret Thanks, very much for the question. That's a that's a good one and I would tell you the way the way that I'm thinking about it is the second quarter is probably the best read for us in terms of what to expect going forward.
In the second quarter, we really were able to run the <unk> play cleanly, because we had had a significant.
The reduction in overall hospitalization rates from COVID-19, and our field team was running and gunning really working that one <unk> play our field leadership team did an excellent job at focusing them on our top 100 customers. So what I can tell you out of that experience is that the turn rates out of those top 100.
Customers in the second quarter were at or above our historical averages despite seeing a a respiratory census rates in the United States. In May for example that was 20% below what historical averages work.
So that piece of data. It gives me a great deal of confidence that as we've now run. This one age would be playing going after the next 100 that were going to see a significant amount of success.
With respect to the second part of your question about near term uptake what I can share with you is last week I was in Boston at the American College of emergency physicians conferences. The first medical conference that was back in person and I had a lot of opportunities to interact with the.
Physicians from around the country over cocktails and between the sessions and you know what I learned was they had used a ton of our devices in that emergency department setting and as they were just learning more they were very surprised to learn that they could use this on the hyper Catholic patients as well and actually quite excited to do.
Do it so it feels to me like the ground is very fertile for going out and do it but it's going to require our field team to go out and run that <unk> quite so I'm very confident in what I'm seeing it simply will be a function of time to do it.
Okay. And then you also said that you can theoretically if this is a more recurring chronic disease you know unfortunately it might be.
How do you look at that Tam or getting bigger.
Or is it just a number of new patients that could potentially in the market and you're sending crude comes back.
Any context on that.
Well you know that's a that's a difficult.
Answer to give in numbers, what I will tell you is that there are really two sets of patients that this whole pandemic has created for us to continue to serve going forward first is moving more into an endemic phase and this we believe that we are going to continue to see COVID-19 spring up in parts of the war.
But we're in on a seasonal basis, we see that in the in the southern tier of the United States. For example, when it gets really hot out people went back inside and into the air conditioning and that's when we really start to see the beginning of the Delta surge in the U S.
Second group of patients that we're looking at our our Covid long haulers I mean, this is a very significant number of patients and we know that the one of the elements of the long haul COVID-19.
Syndrome is respiratory issues. So it's going to take us some time to be able to get our arms around just exactly how many patients and what this looks like but.
As far as we can tell despite having the vaccines, which is going to move it more into an endemic thing it's going to be an important part of our business going forward.
Okay, and just last one for me and this one is more directed to John can you talk maybe about some of the expectations that you have around disposable utilization capital trials in <unk>.
'twenty two 'twenty three sort of alluded at least a disposable utilization a bit.
But I listened to Joe and I hear the <unk> and I say, well, that's actually a pretty encouraging sign for utilization. So that maybe some context, there and how we should think about that installed base increase versus capital sales.
Thanks, guys.
Okay. Thanks, a lot Margaret so as we.
Look at 2022, and 23 and beyond.
I think right now, we're not going to be providing guidance for.
'twenty two 'twenty three at this point I think we're excited about the size of the installed base, we have going into 2022, and 2023 and going out and executing that one <unk> program I think as I look back at Investor Day.
Spoken about growing our business they are doubling our business over that five year time horizon.
Our business on a compounded annual growth rate in the mid teens and based upon the installed base growth. We have seen plus. The addition of the new <unk> gold and silver accounts. This most recent quarter and we feel good about we feel good about that long term compounding of growth rate.
Thanks, Chris.
Thank you MS case, our next question today will come from Bill <unk> with Canaccord Genuity.
Hi, great. Thanks, Good evening can you hear me okay.
You bet.
Okay. Thanks.
Just a little clarity around.
You know.
Joe I think you've given us some good color on what you've seen with one each one D. In Q2 and I was just curious you know I know COVID-19 was pretty pervasive in Q3, but is there any pockets of it.
Examples you could share with us maybe that didn't get impacted and maybe you did the <unk> and continued to see.
You saw continued you shouldn't utilization or anything like that that kind of as you you had that view in Q2 anything in Q3 that we can point you to say, yes, it's kind of you just need to get in there and train them and then you'll see that usage continue.
Well, thanks, very much bill for that question I. Appreciate it you know probably the.
Not in Q3, because literally every single person in our organization was focused on meeting all of those customer needs.
Folks that are absolutely critical to making sure. They can take care of these patients and one of the things that our technology does is brings a much easier form.
Setting up and running the gear. So when your manned down in a hospital anything we could do to make it easier for them to treat those patients is going to be well received and that I think is going to be an element of that one each one the training that we're doing here in the fourth quarter and beyond.
Okay.
Thanks for that and then.
How you have a really unique look into kind of what's going on at the ground level given your product set in treating COVID-19 patients I was just wondering if you could give us maybe a little color on what the cadence looked like whether it be weekly or monthly as we kind of flowed through Q3 and kind of where do we sit today in Q.
For just your kind of perspective, I think that's very unique.
So.
We like the C. D C. 's weekly hospitalization data, we find that to be incredibly useful for us.
So we actually use that very aggressively and we plopped that against our high flow disposable shipments are actually on the pose on a weekly basis to be able to understand the shape of that curve. During the first major wave was was interesting.
For the curve in the most recent wave was very very tightly correlated.
So.
We look at that we think about now for any kind of future waves and personally I don't feel like we're going to see any more really massive waves. If we can get more people vaccinated.
Natural immunity, that's showing up from folks who have had it.
That said you know we're watching we have a very robust business in Israel very robust business and we're watching that data set coming out of Israel very closely.
Around the efficacy of these vaccines over time and you know there has been a bit of information coming out of there about it.
Some of that efficacy taper off a little bit so we're paying close attention to that as we consider our production planning building out that increase in disposables capacity and creating more diversification by putting that in Mexico, and having another labor pool to go and really scale that up rapidly if we need it.
I think that's what we're looking at we.
We did see a significant pop in the Asian markets with the Delta Serge.
And now we're keeping our eye on this delta plus in the other variants that you know may.
May potentially surface, we just have to be ready I've said, it before them and it keeps saying it anytime we're having to deal with a COVID-19 surge until a lot like being in a knife fight in a dark room and we just have to be prepared to do whatever the customers need to take advantage of that and then be able to flip back and run one H one day and then I'll tell you what our teams are doing an excellent job of it.
Demonstrating that ability to flip from one play to the next.
Yeah, great. Thanks, and then just one for John if I could just your Q2 your Q4 guidance for the U S is similar to Q2.
Is that similar on both capital and disposable or you're just talking in overall number and how should we think about it and thanks for taking my questions.
Yeah. Thanks, a lot, though in terms of U S cat Q4, as compared to Q2 look pretty similar in terms of total dollars I think it might be a little little bit heavy on disposables in a little lighter on capital I think our thought is going into the fourth quarter most of the capital.
As had been placed for the year. So we wouldn't expect to see quite as much going into the fourth quarter from a capital perspective.
Great. Thanks, so much.
Thanks Bill.
Thank you and our next question today will come from Marie Thibault with BTG.
Hey, Good afternoon, John Jon This is Sam on for Murray. Thanks for taking the question, maybe moving over to new products here.
<unk> launch of <unk>, two point out of this quarter.
You know maybe any thoughts on how you're thinking about the expected ramp there to go to market strategy, maybe if you're planning to start with those top gold and silver EDI accounts any other color there would be great. Thanks.
So I'm going to tell you that you know what I want to do is to go slow with this because we have so many net new customers from that expansion and just running that when each one day, we will be bringing that platform out into the marketplace. We are very excited about what that does in terms of allowing the hospitals to treat these patients anywhere in the hospital in a <unk>.
Frictionless way.
We really are going to keep the vast majority of our effort and our field organization focused on that one <unk> really get people to using this on hyper Catholic patients that said I will tell you that.
Fulltime access piece that we're really beginning to work on we were delighted that we booked our first deal with that we're now starting to see our field team.
Begin to Reengage with that now that they can and just wanted to give a shout out to the folks in our northeast region for having booked at deal that's very exciting and I can't wait to see what the rest of the team does that folds in really nicely with the existing installed base and with one H. One day. So when I think about that I'm going to really make sure that we're seeing.
And very closely focused on 120 with all these new customers and continue to bleed <unk> 2.0 out into the market, but we're going to do that slower.
Understood. Thanks for that and then maybe on the oxygen assist module here couple of more countries here and across EMEA any customers start to use it outside the NICU or is it predominantly mostly in the NICU still no no we've.
<unk> seen it in the in those markets, where you see any kind of COVID-19 flare up its turned out to be a very effective tool for treating COVID-19 adults because if you think about it you can set their S. P O too saturated auction targets and you don't have to go into the room to adjust it. So we have seen that we have retrieved a number of very interesting customers.
Stories around that so we've actually seen that and we're pretty excited about what that bodes for the future and then we're seeing them start to use it on other type of adult cases, as well, but our focus will remain on the NICU for the near term, we think that that the use case in the NICU is is very very positive and we just wanted to take time to really drive that with our sales force.
We do not want to get them too distracted.
So customers are going to keep using it where they're going to use it our field team is going to go into the NICU and drive the hell out of it.
Great. Thanks for taking the questions.
Thank you.
And gentlemen, your next question will come from Jason Bednar with Piper Sandler.
Hey, good afternoon, thanks for taking the questions and congrats on the quarter here.
Joe.
Can you talk about how you might be benefiting from maybe some challenges that your competitors in <unk>.
<unk> ability to deliver when others are others cannot I think that's the wording you used there maybe talk about how your response levels contributed to some of the success in the quarter and maybe how that positions you to benefit as we think forward to future years.
Well I think there's a couple of elements to that right and I alluded to that in the earlier part of the call about number one just are we a better technology I mean, it just really really works well that combination device. These combination bipap and high flow nasal cannula commodity I flow systems or mechanical ventilator and they've put on these high flow <unk>.
<unk>, we've been dealing with those people for the last three or four years around the world and we've proven to be very very adept at competing with them and doing it in a way that the customers truly understand the benefit.
That had been a vacation element of this and that and that patient story that I described to you make no mistake argument of vacation is really a secret weapon and youre going to hear more and more about that as time goes on and we look at where we're going to take that next in the marketplace.
There are some challenges that some of our other companies out there dealing with you know there are a couple of recalls going on now with people, who put high flow channels on their on their mechanical ventilators, rather bypass and I have no doubt that is helping us right, but that that is not something that I would characterize as a long run tailwind.
Our ability to go out there with white glove service without field team that field team is exceptional and how they approach. This servicing their customers that I think is a very high differentiator coupled with our medical education I think we've done a really good job of connecting deeply with those customers out of that met at front.
And then that ability of that supply with no one else can I don't know how to all our supply chain people did it but they just.
These people I wouldnt trade them for all the tea in China.
Very helpful. Thanks, Joe and then maybe to follow up on on vapor therm access and congrats on the on the first book in there.
You mentioned the sales force ready to run as of July.
They just recently begun to really engage with those gold and silver accounts, but.
Maybe aside from that in that first win that you do have any any feedback from those initial discussions what you learned from this process you know how long the.
The conversations May may take just as the as we calibrate ourselves and think forward on how to build the center models.
Well I think the way you build it in our models as you just take landry's, 15% long run growth rate. That's it right I wouldn't try to get to you know building them all out that's our goal right I can tell you that everybody that I've talked to Jason about this and I've been talking a lot now to customers around this idea that they're very excited about this idea and I think John Landry's upsets personal experience in this regard maybe.
If you could share a little bit about what he's hearing from customers that he's talking to.
Sure. Thanks, Joe so great opportunity to get out in the field and speak with.
Some of the clinicians out at a customer on the West coast.
Feedback as I walk through the benefits or potential benefits if they put them access with this particular customer was the ability to potentially keep those patients that are discharged from the emergency department.
Post COPD exacerbation event keep them home and keep them out of the hospital for a period of 30 days after the discharge, which as you know from a.
CNS penalty perspective, and if those patients come back in and negatively impacts at hospitals.
Readmission rate, there's a potential penalty for those hospitals so.
This particular customer is very very excited about the opportunity to have some sort of tools to keep those patients monitored.
To be alerted to the event that there were any deviations from their underlying unique baseline status and then be able to prevent a potential return trip to the emergency department. So it's.
It is great to hear that directly from our customer and are grateful for the opportunity to go out there and you can share that with them.
Jason I would also add though that nobody else is doing this okay. So this is brand new customers who've never like we're bringing them something that's completely different they've never seen before so it's going to take some time as they figure out how to buy it and how to think about it we figure out how to spell it out to make sure that everything we deliver on it meets their needs.
But this is brand new brown that recover in which I'm pretty excited about because it's it's got to solve a problem that they have that's very significant.
Yes, absolutely.
Maybe just one more if I could squeeze it in John I mean, you talked about maybe some above normal inventory levels of your customers might be sitting on.
Just maybe some extra stocking that helping us in the third quarter at the expense of the fourth quarter.
Sorry, if I missed it but I mean is there a.
A number that you're talking about what that what extra stocking may have happened on the disposable side.
Just as a again, you're thinking about modeling here in the third quarter to fourth quarter.
Yeah, Hi, Jason Yes in terms of the numbers didn't provide any granularity in terms of what that potential may have been I think when the when you look at the fourth quarter. We think it's going to look pretty similar to the second quarter. This past year might be a little bit heavier on the disposable side in the U S.
And what we saw in the second quarter, but on the flip side I think the capital might be a little bit lighter as we think most of the ordering has happened from a capital perspective in the third quarter.
So in total roughly about the same but just a little bit different split.
Yeah.
Okay, Alright, thanks, guys.
Welcome.
And gentlemen that will conclude our question and answer session for today I will now turn the call back over to Mr. Army for any closing comments.
Thanks, very much I want to thank you all for your interest in <unk>, we really appreciate it and we look forward to updating you on our next quarter on our progress again next quarter have a great day.
Thank you, ladies and gentlemen that will conclude today's paper <unk> third quarter financial results Conference call I would like to appreciate you all for joining us and wish you all a great day Goodbye.
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