Vapotherm Inc (VAPO) 2021 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Vapotherm Second Quarter 2021 Financial Results 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 Westwicke. Please go ahead, sir.

Good afternoon, and thank you for joining us for the Vapotherm Second Quarter 2021 Financial Results Conference Call. Joining us on today's call are Vapotherm's President and Chief Executive Officer, Joe Army; and its Senior Vice President and Chief Financial Officer, John Landry.

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, 2020, which was filed with the Securities and Exchange Commission, or SEC, on February 24, 2021; our quarterly reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021, which were filed with the SEC on May 5, 2021 and August 9, 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 calculated 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 Vapotherm's 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. Then I'll hand the call over to John Landry, our CFO, to provide the financial details of our second quarter 2021 results. I'll then update you on our key focus areas for the remainder of the year before taking questions.

2Q was another strong quarter for Vapotherm. We generated $20.6 million in revenue and increased our worldwide installed base by nearly 1,200 units to over 32,000 units. The majority of this increase was driven by our international business as COVID-19 was still prevalent in some areas outside the U.S., notably Latin America. We rebranded HGE Digital Health as Vapotherm Access and prepared to launch our Vapotherm Access Post Care offering. Lastly, we hosted our first-ever Investor Day in our Exeter, New Hampshire headquarters, where we shared more about our strategy, products and financial goals for the business.

Our objectives for 2021 remain the same: one, ensure the current installed base is productive; two, grow the installed base; three, launch HVT 2.0; and four, establish our digital business. These 4 objectives will guide us towards our goal of becoming the 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 is productive. On that front, our One Hospital One Day, or 1H1D, strategy is focused on training and educating customers on our technology's ability to treat both hypoxic and hypercapnic patients. As part of this strategy, we actively engaged our ED speakers bureau to educate our customers on how to use our technology on all patients and to share their positive experience with high-velocity therapy, especially with hypercapnic patients.

As John will share with you, U.S. disposable utilization rates were lower in 2Q 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 applications for our technology.

While the overall U.S. disposable utilization rate for Q2 was below historical averages, the disposable utilization rate for our top 200 U.S. customers was at or above the historical disposable utilization rate in 2Q. In addition, 93% of these accounts placed orders in 2Q, and all but a few of the remaining accounts placed orders in 3Q after burning off larger purchases made through 1Q. This gives us confidence that our 1H1D strategy is working, and we'll be able to achieve historical turn levels across the entire customer base post COVID.

Second, U.S. respiratory census, 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 due to reduced flu, RSV and COPD patients staying away from the hospital as a result of COVID-related fears. Over time, we expect that these patients will return to the hospital. While respiratory census was down 20% in 2Q as compared to 2Q '19, our U.S. disposable revenue grew 18% over the same period, which gives us confidence that we'll be able to grow our business in the mid-teens post COVID.

We're also focused on building our strong base of clinical evidence and working to be included in additional society guidelines. Our HYPERACT study designed to further support our ability to treat hypercapnic patients now has 4 centers trained and is enrolling patients. Our U.S. field team is educating our customers on the recently issued Plotnikow study published in Argentina, which focused on hypercapnic patients.

I'm pleased to report that high-velocity therapy was included in the AARC's recently issued Safe and Effective Staffing Guide. As a result, our technology will receive the same productivity credit as BiPAP and CPAP, which eliminates a potential barrier to the adoption of our technology. These guideline changes and study results serve as important resources in our 1H1D educational efforts.

We are working to increase revenue per installed unit through the introduction of new products like our Oxygen Assist Module, or OAM. OAM is now available in 18 countries and also include subscription-based revenue, which increases the recurring revenue per installed unit. We are pleased with the year-to-date results from our OAM launch in 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 of both existing and new accounts by leveraging our expanded sales force in the U.S. and select international markets. In the U.S., we grew our installed base by nearly 300 units and added 12 new ED Gold and Silver accounts in 2Q. We saw roughly 2/3 of this installed base expansion coming from existing accounts with 1/3 coming from new accounts. At the end of 2Q, we were in nearly 500 ED Gold and Silver accounts in the U.S. Internationally, we grew our installed base by over 900 units, largely driven by high rates of COVID-19 hospitalizations in Latin America.

Our third objective is to launch HVT 2.0 worldwide. HVT 2.0 has its own built-in air source, which will allow us to break free from the need to be connected to a hospital's piped-in air. Our initial focus with HVT 2.0 will be on the hospital market, where we have an existing customer footprint. We expect to initiate a worldwide limited market release later this year. We will also use the limited market release to learn how our HVT 2.0 might be able to help patients in new care settings, including the home and EMS settings as well as how we can integrate it with Vapotherm Access.

Our final objective is to establish our digital business, now branded Vapotherm Access. Our initial product, Vapotherm 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 a fine on its entire book of CMS business.

In 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 Silver ED accounts with significant COPD patient discharge volumes and will focus on preventing or reducing COPD readmissions. We will learn from this new product launch as we expand our Vapotherm Access offerings beyond post care.

Overall, I am very proud of our success in the first half of 2021. Our team continues to meet the needs of our customers each day in a dynamic market, and I am very excited about what 3Q and the remainder of the year holds for our business. After John details our financial results, I'll spend some time outlining our focus for 3Q and the remainder of 2021. Johnny?

Thank you, Joe. As mentioned, revenue in the second quarter of 2021 was $20.6 million compared to revenue of $35.2 million in the second quarter of 2020 and $12 million in 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. International revenue was $9.3 million compared to second quarter of 2020 revenue of $9.5 million.

Capital revenue was $6.2 million in the second quarter of 2021 compared to $21.5 million in the second quarter of 2020. Worldwide capital revenue decreased year-over-year due to the significant COVID-19-related demand we experienced in the second quarter of 2020. In the second quarter of 2021, we sold 1,300 PF units worldwide versus 3,900 in the second quarter of 2020, which was driven by significant increases in COVID-19-related hospitalizations.

U.S. capital revenue was $2.7 million compared to $16.1 million in the second quarter of 2020. International capital revenue was $3.5 million compared to $5.3 million in the second quarter of 2020.

Disposable revenue was $12.8 million in the second quarter of 2021, representing a $400,000 decrease over revenue of $13.2 million in the second quarter of 2020. In the second quarter of 2021, we sold roughly 138,000 disposables worldwide versus 139,000 in 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 in the second quarter of 2021.

International average selling prices are lower than in the U.S. as we largely use a distribution network to serve the international markets. U.S. disposable revenue was $7.3 million compared to $9.4 million in the second quarter of 2020 due to a year-over-year decrease in COVID-19-related hospitalizations and lower respiratory census. International disposable revenue was $5.5 million compared to $3.7 million in the second quarter of 2020 due to significant COVID-19 demand in Latin America.

Worldwide service revenue was $1.7 million in the second quarter of 2021 compared to $539,000 in the second quarter of 2020. The increase in worldwide service revenue was due to Vapotherm Access-related revenue and an increased worldwide installed base of Precision Flow units. Our worldwide installed base grew by approximately 1,200 units in 2Q. As of the end of the second quarter, our installed base consisted of approximately 32,000 units, reflecting 45% year-over-year growth. Much of the installed base growth was driven by an increase in Latin America and Brazil, in particular, as they face elevated COVID-19 hospitalization levels going into winter.

Our monthly U.S. disposal utilization rate for the second quarter of 2021 was 1.05 as compared to 2.15 in the prior year and 1.83, which was the average disposable utilization rate for the second quarters of 2017 through 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 could not get enough oxygen in their system. As expected, it will take time for these newly installed units to become fully productive, and we were especially focused on educating our new customers on how our technology works with hypercapnic patients like COPD patients who often have difficulty clearing carbon dioxide from their system.

Second, 2Q 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 in respiratory-related discharges was due to near 0 flu and RSV levels and the fear of being exposed to COVID-19 in the hospital. We expect these patients to return to the hospital over the long term. Despite a 20% decrease in respiratory census, our U.S. disposable revenue grew by 18% in 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 in the mid-teens post COVID.

The monthly international disposable utilization rate for the second quarter of 2021 was 2.29 as compared to 2.70 in the second quarter of 2020 and 2.45, 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 installed base. As in the U.S., it will take time for these newly installed units to become fully productive.

Gross profit in the second quarter of 2021 was $9.4 million, a decrease of $8.2 million over gross profit of $17.6 million in the second quarter of 2020. Gross margin was 45.6% in the second quarter of 2021 compared to 50.1% in 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 in 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 in the second quarter of 2021, an increase of $1.6 million over $24.4 million in the prior year. The increase in operating expenses was primarily due to an increase in research and development and general and administrative expenses, partially offset by reduced sales and marketing expenses.

Net loss in the second quarter of 2021 was $17.3 million or $0.67 per share compared to a loss of $8 million or $0.35 per share in 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 in the second quarter of 2020. The increase in adjusted EBITDA loss was primarily due to a reduction in revenue on a year-over-year basis.

As of June 30, 2021, cash and cash equivalents were $81.5 million compared to $93.8 million as of the end of March 2021 and $113.7 million as of December 31, 2020. In 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 we're only providing annual guidance. Based on our results through 2Q 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.

Fiscal year revenue guidance reflects the impact of COVID-19 that we've seen so far in early 3Q. As previously communicated, we expected light capital sales in the second half of the year due to reduced capital budgets. However, we are currently seeing increased demand for our capital units and disposables in certain U.S. geographies due to COVID-19 variants. Therefore, we expect to see near similar worldwide revenue levels in the third quarter as we did in the second quarter, driven by COVID-19 demand in the U.S., while we expect international revenue to grow about 30% over the third quarter of 2019.

Based on what we've experienced in previous COVID-19 surges and the potential impact of mask mandates and return of social distancing, our guidance assumes lower worldwide revenue in the fourth quarter than in 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 hospitalizations 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 46% to 48%. And we now expect full year operating expenses of $99 million to $102 million, an increase from previously issued operating expense guidance of $97 million to $99 million due primarily to investments in our Vapotherm Access offering.

At our Investor Day, we also introduced long-term financial goals. We intend to grow our revenue annually in the mid-teens, resulting in revenue doubling over the next 5 years, and improve our gross margins to 65% over this 5-year time frame.

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

Thanks, Johnny. Before sharing our 3Q objectives, I'd like to share some of the highlights from our Chief Commercial Officer's extended U.S. field travel. As soon as our Investor Day was completed, Greg Ramade spent 3 weeks on the road visiting customers.

His key findings were confirmation of the following: first, customers who purchase large quantities of PF units during COVID 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 ED 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 hypercapnic patients due to this training; lastly, several hospitals shared with him that they are actively looking to reduce COPD readmission rates and were interested in learning more about Vapotherm Access Post Care.

As we look ahead to 3Q and the remainder of the year, we will place heavy emphasis on ensuring our installed base is productive. Through our One Hospital One Day program, we will educate our customers on how our technology treats both hypoxic and especially hypercapnic patients throughout the hospital. We will also educate our customers on the AARC's newly issued Safe and Effective Staffing Guide in which we now receive the same productivity credit as BiPAP and CPAP. We will develop clinical evidence like the HYPERACT study, demonstrating our ability to treat hypercapnic patients, consistent with the outcomes we saw in the Doshi ED randomized controlled trial, ED RCT subgroup analysis and recently issued paper by Dr. Plotnikow from Argentina.

To increase our recurring revenue per installed unit, we will drive OAM adoption in the U.K., EU and Middle East. We are working on quantifying OAM's economic value to potentially pursue additional reimbursement in the U.K. and other EU markets. We will work with the FDA through the breakthrough devices program to clear OAM in the U.S. As previously announced, our IDE clinical study was approved by the FDA, and we are working closely with the study sites to ensure the study runs as smooth as possible. We expect to begin enrolling patients in this clinical study in the near future. We will grow our worldwide installed base and prepare for the limited launch of our new HVT 2.0 platform in the second half of 2021.

Finally, our sales team will be introducing the newly launched Vapotherm Access Post Care product to our Gold and Silver ED customers. We are looking forward to hearing our customers' feedback as we refine and develop this product. Vapotherm Access Post Care will also connect us more directly with COPD patients, which will provide important information on their needs in both the inpatient and home setting.

Before closing, I would like to share the following patient story, which came to me from one of our field team members in 2Q. I spent the morning educating the clinicians on high-velocity therapy. While there, the ED respiratory therapist got a call for a BiPAP unit for a hypercapnic COPD patient. She didn't know what any of his numbers were, and I asked her if I could come down with a Vapotherm unit and talk to the physician, and she agreed. We spoke to the physician, and he told us the patient's CO2 was high at 75. His 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 Vapotherm.

When we started him on high-velocity therapy, I told her we could leave the BiPAP outside the room and probably wouldn't need it. After we put the patient on our technology, a nurse came in and asked me to explain how it works. Within 5 minutes, the patient sat up, opened his eyes and asked where he was. The nurse was shocked at how quickly it worked. I went back about 40 minutes later to check on the patient, and he was sitting up in bed and asking for his breakfast. In the meantime, the RT put the BiPAP unit back in the closet.

In conclusion, I'm very proud of the efforts of our entire organization put into 2Q 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 team's tremendous work ethic, we will accomplish our 2021 objectives. We're excited about the opportunity to drive further adoption of our high-velocity therapy for both hypoxic and hypercapnic patients in 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 I'd like to open it up for questions.

(Operator Instructions) First question comes from the line of Bob Hopkins from Bank of America.

It's Brad Bowers on for Bob today. So I really appreciate all the color you gave on the disposables in the quarter. I understand that it might have been a little lighter. But I just want to know, should we think of this as the floor for maybe the utilization going forward? I mean you have COVID coming out, people getting vaccinated, and you don't really have the rise of the Delta in the quarter. So is that the right way to think about it?

Brad, it's John. Thanks for your question today. So in terms of where we were, Brad, as we think about the quarter, when we look at the installed base growth that we saw there over that period of time, the last 5 quarters, we grew about 65%. And one thing we saw there is that the -- basically, the utilization in the quarter is about 1.05 versus what we saw previously at 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 pretty much near 0 flu, very low RSV. And in addition, we saw a lot of the COPD patients staying away from the hospital. So from a pure numbers perspective of patients entering the hospital, we say it may not be the absolute low point, but it is pretty low from a census perspective for patients that would be eligible to treat.

Got it. That's helpful. And then just one more follow-up, if you don't mind. So I appreciate you giving some color on Q3. Given all the noise in the year, that will help out with modeling. But just thinking about what that kind of implies for Q4, I mean, that implies almost flat for the rest of the year, if I'm doing that right, obviously, give or take a little bit in Q3 here. But I 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 Q4. But it doesn't really seem to -- the guidance doesn't seem to imply that. So just kind of wonder what your thoughts were there.

Sure, Brad. So in terms of the concentration of fourth quarter from a capital perspective, we'd expect in the U.S. -- our assumption is that capital would be, particularly in the U.S., pretty light for that fourth quarter. Again, what we've seen in previous surges is once the 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 in the way of capital in the fourth quarter. And we would see utilization on the disposables in the fourth quarter. Assumption is it would probably be a little bit above what we've seen here in the second quarter as we do go into flu 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 what we've typically seen is fourth quarter is typically larger than the third quarter. Here, we'd expect to see third quarter larger than fourth quarter coming out of the year.

The next question comes from the line of Margaret Kaczor from William Blair.

This is Maggie on for Margaret. I just wanted to ask a question on kind of what the full year guidance implies. So are there any assumptions for the flu or RSV, particularly in the fourth quarter, in that full year guide? Or are they mainly just the COVID-19 assumptions? And then how are you guys thinking about the impact of the flu as we head into the back half of 2021 and into 2022?

Sure, Maggie. It's -- thanks for the question today. In terms of third quarter, we're looking at that as a quarter, largely in the U.S., in particular, driven by some of the COVID demand that we're seeing in certain geographies in the U.S., particularly in the southern part of the U.S. that we're reading about in the news here recently. And again, as we've seen in other surges, it's typically a 60- to 90-day window before we start to see it subside.

So in the fourth quarter, our assumption is that we'll see that happen again here. And in particular, we're thinking about modest flu season, modest RSV season, given the introduction of -- or reintroduction, I should say, of mask wearing and potentially social distancing here in the fourth quarter as we adjust to the increase here in COVID-19 cases in the U.S.

Great. That's helpful. And then if I could just ask one more, just maybe on 2022, kind of looking at the disposable turn rate. So I know you guys have talked about these turn rates being lumpier, particularly in 2021. And just kind of with what we saw in the second quarter, do you expect this lumpiness to continue as we head into 2022? How can we think of that particularly as you look to launch the HVT 2.0?

Sure, Maggie. As we think about disposable utilization rates, our experience is that it will probably be -- continue to be a lumpy period of time until we can get beyond COVID and COVID normalizes out. From an expectation perspective, we think it'd probably be about 4 to 6 quarters of period of time for us to work through our installed base, work through educating all of our net new customers on the full use of our technology across all use case settings, whether it's hypoxic or hypercapnic patients.

I think as we look at the success we've had here in the top couple of hundred accounts in the U.S. in which we were able to educate those customers and we saw that their turn rates were at or above historical levels in the second quarter, as we continue to educate customers beyond the top 200, we're confident over the long term, we'll be able to get those utilization rates back to historical levels. And again, 4 to 6 quarters is probably about the time frame, we think, to get there post-COVID stabilization.

The next question comes from the line of Bill Plovanic from Canaccord.

It's John Young on for Bill tonight. Maybe just touching on what you're seeing right now in Q3. We've been hearing from clinicians that this wave of COVID is much different than the previous wave, specifically younger patient demographic. How do you think this impacts the utilization of Vapo's technology?

John, thanks for the question tonight. In terms of what we're seeing now is we're seeing the COVID variant, to your point, impact people of all ages, including younger people, whereas in some of the previous waves, it's more older patients, more vulnerable patient populations. In terms of what we're seeing now is it's impacting, in particular, specific geographies here in the U.S., Florida, Louisiana, Texas, across the Southern U.S. at this point.

In terms of what does it mean for adoption or utilization of the technology, I think it'd probably be depending upon where COVID hospitalizations track and trend. I think it would probably be fairly similar. Our technology applies to patients of all ages suffering from respiratory distress. So we have the capability to support any patient who presents an Emergency Department in respiratory distress. So I think depending upon where COVID hospitalizations go, we'll, in large part, determine the utilization here in the third quarter.

Great. And just a follow-up question. I believe you were in a limited market release for Vapotherm Access in the quarter. Any early lessons from that limited market release you can apply to the full market release?

I think I could take that one, if you want. So I think what we've learned is -- we're learning is that the hospitals, particularly our 500 Gold and Silver ED accounts, seem 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 we're also running into the challenge of helping device people learn how to sell a service. And we're lucky in that we've got a few of our folks in 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 in person in Chicago here earlier in the quarter and watching them really learn this and digest it.

But I think what we've learned is that 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 the fact that we're already treating these patients with our high-velocity therapy, these hypercapnic patients as well as hypoxic when they come in the ED. So it's a really nice fit all the way around.

Next question comes from the line of Marie Thibault from BTIG.

I'd like to ask my first here maybe as a 2-parter on the training and education process. I heard those stats about the top 200 accounts and the higher utilization seen with those accounts. So I'm curious about how long that training kind of took to kick in for those accounts and when you start to see sort of that improvement or that tipping point for those accounts and secondly, how we should think about the Delta variant or future variants sort of impacting your training efforts. 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 Marie, that's an excellent question. And it's one of -- candidly, it's a source of frustration for me because second quarter was the quarter where it was pretty clean. And our people were back in these accounts, and we had them all focused on those top 200 accounts running 1H1D. And it was working. 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're spot on when you mentioned this Delta variant is closing down our access. It is moving us back away from being able to be in these accounts every day and supporting them as they learn how to use it on non-COVID patients.

But listen, I'm not going to complain about that because the faster we can grow that installed base, the bigger this business becomes in the medium to longer term. So it will -- one, 1H1D works. And typically, you're going to see results pretty, pretty soon around this. From the time you go in there and do your 1H1D, you're beginning to see them use it on other types of patients pretty quickly. But it is frustrating that we are now back into a situation where we're really focused on supporting all of our accounts who are dealing with a COVID surge and making sure that we can meet every demand, every need that they have.

Our next question comes from the line of Jason Bednar from Piper Sandler.

A couple for me today. I'm going to skip over 2021 here for a second. You gave some other forward-looking commentary here, including around the ability to grow mid-teens in gross margins. This should be above 2020 levels. So I wanted to confirm that the mid-teens comment was a company-wide comment, I think, from your end, even though I think you're referencing disposables growth there in the period just in terms of how you're thinking about the business as we normalize beyond '21. So I just wondering if I have that correct and how you're characterizing that point. And then on the gross margin side, how much of that margin upside versus 2020 is volume-dependent versus what might actually be within your control to make production more efficient to pull out cost?

Yes, Jason. Thanks for the question. It's John here. In terms of our ability to grow the business going forward, yes, I think mid-teens is on the overall business itself. I think our long-term guidance we provided at Investor Day was 15% per year of compounded 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 the levers. All the levers are in play, Jason, to continue to drive that gross margin going forward. I think with new product introductions we have in the horizon here, the ability to drive average selling prices up due to incremental clinical economic utility that we're providing these customers to the ability to reduce cost as we have redesigned and worked on the design of these new products for continued improved quality as well as cost reduction through ease and manufacturability, and then the last one is the overhead utilization to the extent that we normalize our production over the longer term, that lever 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 in 2022, I think we'll have the ability to, again, move back above the '21 levels and above the '20 levels by really driving the production volume and driving volumes after a sequentially reduced sales and production volume year in 2021 versus 2020.

All right. Got it. That's helpful, John. And then just to come back to the OpEx guide for this year. You do have some incremental spending dollars that are going towards Vapotherm Access. It looks like some wise incremental spending that you're doing there to fund that initiative. Wondering if you could expand more maybe on just where those dollars are being targeted. Are these people costs, infrastructure costs, product or software development costs? And then how are you thinking about the ROI for the incremental spending on Vapotherm Access maybe relative to some of the other product development efforts that you guys have undertaken here?

Sure, Jason. Yes, good question. So as we think about the investments we're making, a lot of it's -- you touched upon all the areas, I think, across the board in terms of building out the infrastructure necessary to deliver that post care access to these patients in a hospital-based setting, making sure that we have all the infrastructure backbone available to support those patients and clinicians as well as on the marketing initiatives to broaden the message around Vapotherm Access 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 a new product introduction with very favorable downstream ROI implications for us, at least on par with our next-generation platforms. There'll be some potential investments that we need to make to drive it, but we're excited about what it could do for our business from a top line perspective downstream, which is why we made a conscious decision to make the investments in Vapotherm Access Post Care this year.

We have a follow-up question that comes from the line of Marie Thibault from BTIG.

Wanted to try to sneak in a follow-up here on international. When I looked at the installed base, about 1/3 of your units now are placed internationally, and I wanted hear a little bit about the stickiness of some of that. I know we focused a lot on the U.S. today, but what sort of training efforts are you putting in there? What sort of investments are you making in your field teams to try to ensure that PF units are used outside of COVID going forward?

Thank you, Marie. That's an excellent question. And many of the same plays that we're running in the U.S. around 1H1D with a focus on hypercapnia, we're running them through our direct businesses in Germany and in the U.K. Through the dealer model, we're providing them more materials. We also have clinical people on the ground in a number of these markets, including Brazil and Mexico, for example. We have people on the ground in the Middle East and in other parts of Europe. And now we have people on the ground in Japan.

And so our goal is to provide that clinical support on the ground to our dealers and continue to share those best practices that we developed in other places, but it's basically the same play. It's just we're running it through dealers.

There are no further questions at this time. I would like to turn the conference back to Mr. Joe Army for closing remarks.

Thank you very much. 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. Have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.