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Vapotherm Inc (NYSE:VAPO)
Q1 2020 Earnings Call
May 5, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen and welcome to the Vapotherm First Quarter 2020 Financial Results Conference Call. [Operator Instructions]

It is now my pleasure to introduce your host, Mr. Mark Klausner of Westwicke. Please go ahead, sir.

Mark Klausner -- Managing Partner

Good afternoon, and thank you for joining us for the Vapotherm first quarter 2020 financial results conference call. Joining us on today's call are Vapotherm's President and Chief Executive Officer, Joe Army; and its 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. 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 Factors section of our Annual Report filed on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission on March 4th, 2020.

Our current report on Form 8-K filed with the SEC on April 13th, 2020 and our quarterly report on Form 10-Q for the quarter ended March 31, 2020, which was filed with the Securities and Exchange Commission on May 5th, 2020, and in any subsequent filings with the Securities and Exchange Commission. 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 acceptable 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 Vapotherm's President and Chief Executive Officer, Joe Army.

Joseph Army -- President and Chief Executive Officer

Good afternoon, and thank you for joining us today. I will begin by discussing our first quarter results, then I will hand the call over to John Landry, our CFO, to provide financial details of our first quarter 2020 results, after which I'll update you on our key areas of focus for second quarter and the remainder of the year before taking some questions.

First quarter was a big quarter for Vapotherm as we generated $19.1 million in revenue, a 55% increase over the first quarter of 2019. In the quarter, we grew our worldwide installed base by nearly 1,300 units. 2Q looks to be even better, as in April alone, we estimate that we have already generated between $19 million and $19.3 million in revenue and grew the worldwide installed base by over 2,200 units as compared to nearly 1,300 during the entire first quarter of 2020.

Apart from the strong recent financial results, I believe our business was significantly and sustainably transformed over the past quarter, and I see a very different business than I did 60 days ago for three primary reasons. First, I believe the pandemic fundamentally altered the awareness and usage of our technology. Second, I believe we made significant progress with the development of our Oxygen Assist Module. Lastly, we were able to improve our gross margins in spite of strong headwinds and scale our business ahead of expectations. Let me provide a little color on each of these important changes.

At the beginning of the pandemic, high velocity/high flow oxygen therapy was not viewed as a first line therapy for treating the respiratory distress experienced by many COVID-19 patients, as physicians believed patients who required more than supplemental oxygen would need to be placed on a mechanical ventilator. Now the CDC, WHO, NIH, Society for Critical Care Medicine, American College of Emergency Physicians, the Chinese, German, Italian and Australian Thoracic societies, and hospitals getting hit with the COVID-19 surge around the country, all recognize our technology as an appropriate first-line therapy.

In the pre-pandemic world, the development and alignment of these guidelines would have taken a lot longer to come together, in my opinion. The increased awareness of our technology and the increased need due to the large number of COVID-19 patients, allowed us to expand our business in both new and existing accounts. Since the beginning of 2020, our global installed based has grown by over 3,500 units. By comparison, our worldwide installed base grew by 2,500 units in all of 2019.

Our Gold ED focus paid dividends for us as we opened 50 new Gold ED accounts in the US, since the beginning of the year, up from 12 in the fourth quarter of '19. In addition, our strategy of focusing on the Gold EDs meant our systems were in the right place at the right time to help treat the respiratory distress experienced by many COVID-19 patients who presented to the ER. We were also able to significantly increase our presence in some markets where we have not previously had a meaningful installed base. For example, we had under 100 units in New York City going into first quarter, and, as of the end of April, we have nearly 500 units in the installed base. Internationally, our installed base in Spain grew fourfold from the mid-60s at the beginning of the year to over 260 units.

Just as important as the net new accounts we've added with a significant number of new physicians who were exposed to the efficacy of our therapy, I believe whole new groups of physicians learned about our technology and were able to experience their own aha moments when they observed how COVID-19 patients in respiratory distress responded to our high velocity therapy. The second important change in our business was the significant progress we made with our Oxygen Assist Module or OAM. Since the beginning of the year, we received our CE mark, initiated our limited market release in the UK, and recently received breakthrough device designation in the US, which I believe will help expedite the development, assessment and FDA review of the OAM. The limited market release in the UK has gone well and we saw significant interest, including pull-through, of our Hi-VNI Technology into net new accounts.

We've already developed enhancements based on user feedback and will be expanding the NICU limited release in the UK, and potentially in other select European markets as we move through the rest of the year. Recall that oxygen is a deadly, dangerous, life-giving drug with a narrow therapeutic window, and OAM has been proven to help clinicians maintain oxygen within the targeted oxygen saturation range. We know this is important in premature babies, hence, our initial focus in the NICU. One of the things we've learned in the COVID-19 crisis is that helping clinicians maintain a tight oxygen saturation range is also important for adult hypoxic patients. We plan on offering the OAM to some of our European customers to help them keep their adult COVID-19 patients in the physician-prescribed oxygen saturation range in the coming months.

While there's still a lot to learn, the opportunity for OAM may be even greater than we initially thought. The third reason this is a different company today is we're showing faster gross margin improvement than anticipated despite significant headwinds. I now believe we will be able to scale the business and leverage our fixed cost base faster than originally planned. We increased gross margin despite higher variable costs resulting from major increases in labor costs tied to our more than 3x increase in capital production capacity, increases in supplier freight costs and expedited fees for components as well as our higher mix of capital equipment and international revenue.

I'm looking forward to seeing our gross margin improvement plan play out as our variable cost and mix between capital and disposables revenue and US and international revenue eventually revert to historical norms. Lastly, I want to thank all of our teammates and partners around the world for their extraordinary efforts to serve our customers and their patients on the front lines during this crisis. It has been remarkable to see what they accomplished in a very uncertain and stressful period. They've repeatedly and successfully navigated the day-to-day challenges of scaling our capacity significantly while adapting to significant change at work and at home made necessary by the COVID-19 pandemic. And I've never been prouder of our team.

Now I will turn it over to John Landry, our CFO, to provide a financial review. John?

John Landry -- Vice President, Chief Financial Officer, Secretary and Treasurer

Thank you, Joe. Revenue in the first quarter of 2020 was $19.1 million, representing a 55.4% increase over revenue of $12.3 million in the first quarter of 2019, primarily as a result of increased sales of our single-use disposables due to a larger installed base of Precision Flow units and increased utilization due to the COVID-19 pandemic, which also resulted in an increase in Precision Flow unit sales.

Total US revenue was $14.3 million, representing an increase of 42.7% over the first quarter of 2019 revenue of $10 million, while international revenue was $4.8 million, representing an increase of 112.1% over the first quarter of 2019 revenue of $2.3 million. Capital revenue, including revenue from product sales and lease revenue was $6 million in the first quarter of 2020, representing a 125.3% increase over revenue of $2.7 million in the first quarter of 2019, due to strong worldwide demand for our Precision Flow units. Geographically, US capital revenue was $4.2 million in the first quarter of 2020, representing a 95.4% increase over revenue of $2.2 million in the first quarter of 2019, while international capital revenue is $1.8 million in the first quarter of 2020, representing an increase of 254.3% over revenue of $505,000 in the first quarter of 2019.

Disposable revenue was $12.4 million in the first quarter of 2020, representing a 37.8% increase over revenue of $9 million in the first quarter of 2019, and was primarily driven by increased worldwide demand for our single-use disposables as a result of our increase installed base of Precision Flow units worldwide and increased utilization due to the COVID-19 pandemic.

In the first quarter of 2020, we sold roughly 126,400 disposables worldwide. Disposable revenue was $9.7 million in the US compared to $7.5 million in the first quarter of 2019, representing 28.4% year-over-year growth. This growth was driven by 18.7% year-over-year growth in our US installed base and increased utilization of our single-use disposables due to COVID-19.

International disposable revenue was $2.7 million compared to $1.5 million in the first quarter of 2019, representing growth of 85.9%. This growth was driven by increased utilization of our single-use disposables as a result of our 34% increase in our international installed base of Precision Flow units and increased utilization. Worldwide service revenue was $651,000 in the first quarter of 2020, which grew 8.1% over the first quarter of 2019. $402,000 of the $651,000 was generated in the US, and $249,000 was generated from international markets.

Gross profit in the first quarter of 2020 was $9.2 million, an increase of $4 million over gross profit of $5.2 million in the first quarter of 2019. Gross margin was 48.2% in the first quarter of 2020, compared to 42.1% in the first quarter of 2019. We improved gross margin faster than anticipated due to improved overhead absorption as we scaled production late in the first quarter of 2020, and our ASPs on US disposable sales and international capital sales increased on a year-over-year basis. We've managed this improvement despite significant headwinds from higher labor costs, increased supplier freight and expediting fees incurred to meet the rapid increase in production capacity, and a higher mix of capital equipment revenue and international revenue.

Research and development expense was $3.4 million in the first quarter of 2020, an increase of $89,000 over the prior year. The increase in research and development expense was primarily due to new product development cost associated with our Oxygen Assist Module and next-gen Hi-VNI platform, partially offset by savings due to the completion and launch of our new ProSoft cannula and aerosolized disposable patient circuit in the first quarter of 2020.

Sales and marketing expense was $13.3 million in the first quarter of 2020, an increase of $4.2 million over the prior year. The increase in sales and marketing expense was primarily due to the commissions earned on increased revenue and increased headcount in the worldwide sales and marketing organization, partially offset by reduced T&E due to COVID-19. General and administrative expense was $5.3 million in the first quarter of 2020, an increase of $372,000 over the prior year. The increase was primarily due to increased employee-related expenses, insurance costs and bad debt reserves, partially offset by reduced stock-based compensation expense and T&E due to COVID-19.

Net loss in the first quarter of 2020 was $13.8 million or $0.66 per share compared to $13 million or $0.76 per share in the first quarter of 2019. Adjusted EBITDA for the first quarter of 2020 was negative $10.2 million compared to negative $9.6 million in the first quarter of 2019. Adjusted EBITDA adjusts for foreign currency gains or losses, net interest expense, depreciation and amortization expense and stock-based compensation. The $544,000 increase in adjusted EBITDA loss in the first quarter of 2020 was primarily due to higher operating expenses, partially offset by higher gross profit.

As of March 31st, 2020, cash and cash equivalents were $60.4 million compared to $71.7 million as of December 31st, 2019. Subsequent to March 31st, 2020, the Company raised gross proceeds of $10.2 million or $9.9 million net of commissions through its at-the-market ATM facility. In the first quarter of 2020, our cash burn was $11.3 million, a decrease of $600,000 from the fourth quarter of 2019 due to increased revenue and borrowing under our line of credit, partially offset by the payment of year-end bonuses and commissions. We anticipate working capital needs will increase in the second quarter as a result of materially higher revenue and production.

We provided preliminary April results to give you some insight into the magnitude of the impact, COVID-19 is having on our business right now. However, interim preliminary financial results are not something we plan on providing in the future. Additionally, as disclosed in our April 13th press release, we withdrew our previously announced annual guidance for 2020. Due to the significant increase in demand resulting from COVID-19, which has continued into the second quarter and our inability to estimate the scope, duration and impact of the pandemic, we cannot yet predict the effect of the COVID-19 pandemic on our operations and financial results.

This concludes my remarks. I'll now turn it back over to you, Joe.

Joseph Army -- President and Chief Executive Officer

Thanks, John. Before opening the line for questions, I'd like to review how we intend to focus our efforts in 2020. First, we intend to support hospitals around the world dealing with the COVID-19 pandemic, and will work to manage our supply chain in a manner that puts us in the best possible position to do this. We believe it is likely that the growth in the installed base and disposable utilization will revert to more normalized historical levels in late 2Q, early 3Q.

Recall that 3Q is our slowest quarter seasonally, but volumes pick back up in 4Q when RSV and flu season starts. This year, we will be planning for the possibility of a return of COVID-19 as well. Our focus will continue to be on the largest Gold EDs as that is where these patients show up in the system. We expect to heavily focus on educating all the net new users and sharing with them how to use our high velocity technology on hypercapnic patients as well as the hypoxic COVID-19 patients. And we're also planning to execute on an expansion of our US field organization in the back half of the year as we historically have done.

Secondly, we intend to focus on new product development. We plan to start an OEM neonate IDE study in the US, and move into an expanded NICU OAM limited release in the UK, and potentially certain European markets as we move through the year. We also plan on offering the OAM to some of our European customers for use with hypoxic adult COVID-19 patients in the coming months. Additionally, we plan to turn a great deal of attention to the next-generation system in the back half of the year. Recall, the next-generation system is designed to provide High Velocity Nasal Insufflation using a portable device, removing the requirement for access to built-in wall air.

Lastly, we plan to grow revenue by getting all the newly installed PF units turning disposables after COVID-19 recedes, run our three-pronged gross margin improvement plan, leverage our operating expenses and drive working capital efficiencies over time. To provide a little more insight into how impactful our Hi-VNI Technology is at treating the respiratory distress experienced by many COVID-19 patients, I want to share one of the many patient stories with you from last quarter that comes from one of our New York City hospitals as relayed to me by one of our sales representatives.

This patient was a 54-year-old male who came into the ICU in respiratory distress with an oxygen saturation rate in the low 60s. This low of a saturation rate is very dangerous for patients. Our sales rep learned that the patient's doctor wanted to intubate the patient and put him on a mechanical ventilator, but this patient refused to be intubated. Our sales rep was there at the time assembling the new Precision Flow units that had just been delivered. The doctor grabbed one of the units and put the patient on at 40 liters and 100% oxygen. Our sales rep learned that within 10 minutes, the patient's oxygen saturation rate was at 95%, his work of breathing was reduced, his respiratory rate had declined and he now seemed to be sitting comfortably in his bed. Our sales rep shared with me that, from his perspective, this patient went from almost being put on the mechanical ventilator and potentially dying to being put on Vapotherm and being discharged home three days later to recover.

In conclusion, I'm feeling good with how we performed in 1Q, and how we are set up for 2Q and the remainder of 2020 and beyond. Our installed base is growing materially faster than anticipated and there is significantly more awareness of the benefit of our technology than there was at the beginning of the year. Revenue has significantly exceeded our expectations for this point in the year and our gross margin improvement plan is ahead of schedule, despite strong headwinds. Our key product development initiatives, including OAM and the next-gen system are progressing nicely.

Lastly, I want to reiterate how very proud I am of our team for working to meet the needs of our customers. Thank you for trusting us with your capital, it means a lot to us. Now I'd like to open it up for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Bob Hopkins of Bank of America. Please go ahead. Your line is open.

Kyle Pezzi -- Bank of America -- Analyst

Hey, John and Joe, this is Kyle Pezzi on for Bob. I just had two quick questions. So obviously you're having a pretty incredible opportunity here to expand your presence and place units and potentially have a real long-term opportunity. But I just kind of wanted to hear your thoughts on the sustainability of this growth kind of longer term and kind of your views on the ability to penetrate that previously penned $1.5 billion opportunity. So just wanted to kind of get your views there and how quickly you think you can penetrate that versus what you thought previously. And then also wanted to get your views on the impact of disposable utilization in light of placing so many units in a short period of time. Thanks.

Joseph Army -- President and Chief Executive Officer

Thanks for your question, Kyle. This is Joe. So as I mentioned in my prepared remarks, I think this transformed the business. I think this is a different company than it was 60 days ago. And I really think that it has a lot to do with how many of these new systems that we were able to crack, how many new physicians that were just simply not aware of us, they didn't know what Vapotherm technology was able to do. They've all had their own aha moments on hypoxic patients.

So in terms of the sustainability of it, certainly, I don't think that the rate of capital equipment growth will continue like it is in April. I mean, you saw those April numbers. Those are pretty big, right? But there's no question in my mind that there is at least a year, probably two years that we've been able to make up in terms of our growth plan. And now the question is, what are we going to do about it? We're going to go send our entire field organization into those hospitals and help show all those physicians how to use that technology, not only on hypoxic patients but on hypercapnic patients as well, Type 2 respiratory distress. And so that's the plan, particularly as it relates to that disposable business, because, Kyle, remember, typically speaking, not this quarter, but typically speaking, 75% of our revenue comes from single-use disposables and it's very, very stable and predictable. So we are a disposables company and we're going to continue to do that. But I certainly think that it has changed our business for the better.

Kyle Pezzi -- Bank of America -- Analyst

Got it. And then just wanted to follow up on the, I guess disposable utilization unit. Obviously placing a ton of units here, so just will that kind of have a dilutive effect to utilization in the near term? Or is that the wrong way to think about it?

John Landry -- Vice President, Chief Financial Officer, Secretary and Treasurer

Yeah, it's an interesting question, Kyle. So historically we typically see a turn rate of about 2.2, 2.25 in the first quarter of the year. This quarter we saw about 2.5 in the first quarter. Obviously, much of that increase was likely related to COVID-19. As we've noted in the past, we've begun to see our ED approach yielding slightly higher turn rates. But given the uncertainty around COVID-19, we aren't going to change our models from our historical turn rates. But to your point, it is possible that we might see lower average turn rates over the course of the year as there's such a significant number of these newly installed units that are coming online.

Kyle Pezzi -- Bank of America -- Analyst

Got it. That's helpful. And then one last question for me. Obviously, I think historically you've said in terms of going cash flow positive, you'd need to reach roughly $100 million plus in revenue, maybe $120 million or $130 million. And obviously, kind of April is tracking really well and it looks to me like you should be able to get close to cash flow positive in the second quarter. But I just wanted to kind of hear your reaction to that and kind of understand your views on what would prevent that from happening.

John Landry -- Vice President, Chief Financial Officer, Secretary and Treasurer

Yeah. No, it's a good question, Kyle. I think from our perspective, we have indicated, it's roughly about $125 million or so to cash flow breakeven. I think in terms of this upcoming quarter, not ready to provide any granularity in terms of what that cash flow is going to look like or profitability. But the $125 million is still a good number from a cash flow breakeven perspective.

Kyle Pezzi -- Bank of America -- Analyst

Thank you very much.

Operator

Our next question comes from the line of Cecilia Furlong of Canaccord. Please go ahead. Your line is open.

Cecilia Furlong -- Canaccord -- Analyst

Hi, Joe and John, thanks for taking my questions. I wanted to ask about the Gold ED account penetration and just growth within the quarter. Can you just talk about those accounts specifically, where you were previously and really the room to grow beyond this going forward, kind of where you are in that penetration cycle?

Joseph Army -- President and Chief Executive Officer

So Cecilia, it's good hearing from you and I hope all is well with you. I think the way to think about it is, historically, 60% to 65% of our revenue comes -- our capital equipment revenue comes from current existing customers. We also know that when we put our products, our systems into Gold ED accounts, we know for a fact that the turn rates are higher there than they are, any other place we have.

So what we see as a direct result of COVID-19 is a couple of things. One, we just opened up a whole bunch more of these really, really big EDs. But two, they didn't treat those EDs just -- or they didn't treat those patients just in the emergency department. They took them up to the ICU. And so now we've seen more particularly critical care physicians get educated on our technology, which I think serves to open up further pathways of growth. You think about it, once these get into the ICU, then you could see them going to the PACU, the pediatric ICU. There are many other places in the hospitals that they go.

So I'll tell you that we're very pleased with the success that we had here in the first quarter with opening up these Gold EDs. We think it's the right play, and we've got a lot left that we have to go do. This is the top 1,000 hospitals in the United States, and right now I think we might have sort of 300 of them. And that means that there's a lot left to go. And then the ones right behind that, the silver ones, the second largest 1,000. There's a tremendous amount of opportunity that we have to go get.

Cecilia Furlong -- Canaccord -- Analyst

Great. Thank you. And I guess just tying into that, too, can you talk about sales force expansion at the end of 2019? But then also, has this impacted your thoughts just on how you expand yourself as far as in 2020, maybe potentially accelerate that? Or how are you thinking about sales force growth going forward?

Joseph Army -- President and Chief Executive Officer

Well, as we mentioned during the prepared remarks, we're going to begin that sales force expansion. We're probably going to do it, start it a little bit sooner than what we normally would, Cecelia, only because the world's a really different place with COVID-19. And so having to interview everybody distance wise and then figuring out how to train them and as we get them all deployed, so we just thought it would be smarter to start that earlier in the game and make sure that when we get to the end of the year, we have that sales force expanded as we were planning.

Cecilia Furlong -- Canaccord -- Analyst

Okay. Great. And if I could squeeze one more in. Just I was curious if you could update us on your Aerosol DPC, just how that rollout is going and what kind of feedback you're hearing from the field. Thank you, again.

Joseph Army -- President and Chief Executive Officer

Yeah. I got to tell you, this is a lot -- it's almost like there's the pre-COVID world and the post-COVID world, and this was in the first 2.5 months pre-COVID. I will tell you what, I was so proud of our team. That sales force did an outstanding job at communicating this and letting customers see the value. And it's been very, very well received by our customers, put it that way.

And then it's even more interesting because now you can deliver an aerosolized nebulized drug to a patient without having to be at the patient's bedside. You can actually have the whole aerosolization back at the box, six feet away from the patient, so that's good. But it was great to see that. I think we just got started with that, but it's certainly been a very positive launch and we're excited about it. And just not to leave out the other side of the equation. But that ProSoft cannula, that has also proven to be very well received by our customers. So we're excited about that, too.

Cecilia Furlong -- Canaccord -- Analyst

Great. Thank you, Joe and John.

Operator

And our next question comes from the line of Marie Thibault of BTIG. Please go ahead. Your line is open.

Marie Thibault -- BTIG -- Analyst

Hi, Joe. Hi, John. Thank you for taking the questions, and great job this quarter.

Joseph Army -- President and Chief Executive Officer

Thanks, Marie. It's good to hear from you.

Marie Thibault -- BTIG -- Analyst

I wanted to ask a question on, a tremendous April month, curious whether you're starting to see the demand slow at this point, whether you think there's a couple more weeks left of that. Just curious what the very near term week-to-week trend is at this point.

Joseph Army -- President and Chief Executive Officer

Well, I can tell you the very near term through the end of April was $19 million and change, right? I don't think that we're prepared to comment any further than that, other than that, we're going to keep paying attention to our capacity and making sure that every customer need is going to be filled on our end.

Marie Thibault -- BTIG -- Analyst

And then when it comes to ordering the can [Phonetic] flow units, we certainly heard a lot in the headlines about federal stockpiles of ventilators and states moving ventilator supply around. Is that something that Precision Flow could become a part of in the future?

Joseph Army -- President and Chief Executive Officer

I don't know about whether or not it would be something that the government would want to explore. I can tell you that for our money, we were very focused on getting our systems into the hands of clinicians that were experiencing major patient surges at the moment. And so that's how we were able to prioritize that. I think in the middle of a patient surge, putting boxes in a warehouse is probably a bad idea, it's just not good policy, it's not good for your customers, it's certainly not good for the patients. But with the...

Marie Thibault -- BTIG -- Analyst

I'm thinking more long term.

Joseph Army -- President and Chief Executive Officer

Yeah, with the initial surge past, it's going to be interesting to see what the government all decides to do. It's clear they bought a whole lot of ventilators, mechanical ventilators, right.

Marie Thibault -- BTIG -- Analyst

Right. And then one for John. Understand that you made great progress on gross margins despite some of the headwinds. Do you have any ballpark estimates for how much impact to gross margin some of those headwinds had?

John Landry -- Vice President, Chief Financial Officer, Secretary and Treasurer

Yeah. Probably not going to break it out specifically, Marie, but we did have a nice tailwind, obviously, in the form of increased volume, which provided incremental leverage on our fixed cost of manufacturing. That was nice tailwind for us. And on the flip side, we did have headwinds in the way of paying overtime for our manufacturing team. We had supplier freight charges that we had to pay to get the components to us in very short notice and we had expediting fees to get the components to us also as well. So it's little difficult to predict the timing. But net net, we see nice gross margin improvement. We were up, as you saw, 610 bps on a year-over-year basis.

Marie Thibault -- BTIG -- Analyst

Great. Thank you so much.

Operator

And that concludes our question-and-answer session for today. I will now turn the call back over to Joe Army for any closing remarks.

Joseph Army -- President and Chief Executive Officer

So I want to thank you all for your interest in Vapotherm, we really appreciate it. And we look forward to updating you on our progress again next quarter.

Operator

[Operator Closing Remarks]

Duration: 34 minutes

Call participants:

Mark Klausner -- Managing Partner

Joseph Army -- President and Chief Executive Officer

John Landry -- Vice President, Chief Financial Officer, Secretary and Treasurer

Kyle Pezzi -- Bank of America -- Analyst

Cecilia Furlong -- Canaccord -- Analyst

Marie Thibault -- BTIG -- Analyst

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