Q2 & Q3 2022 Vivos Therapeutics Inc Earnings Call
Gross margin for the second quarter of 2022 was 62% compared to 81% during last year's second quarter, primarily driven by higher costs associated with appliances due to increase in cost of raw materials and VIP enrollments from new incentives deploy to increased VIP enrollments.
As we mentioned on prior earnings calls we continue to refine.
Our sales marketing and promotional efforts with potential vips, not only to increase revenue, but to improve our gross profit and margins.
This includes our expanded social media and digital marketing efforts that Kirk will talk about in more detail later on.
Sales and marketing expense was $1 7 million for the second quarter of 2022 compared to $1 4 million for the second quarter of 2021.
The increase was primarily due to new marketing campaigns updating marketing materials for investors and consumers and enhancements to the <unk> web site offset by a decrease in sales commissions related to lower VIP enrollments.
General and administrative expenses were approximately $7 7 million for the second quarter of 2022 compared to $6 1 million for the three months ended June 32021, the year over year increase was mainly due to higher head count and expenses associated with being a public company as well as increased travel.
And is it an event expenses related to improving conditions with respect to COVID-19.
Net loss was approximately $7 million for the second quarter of 2022 compared to approximately $4 million for the second quarter 2021, the year over year increase was primarily from higher G&A and sales and marketing expense due to the factors I just discussed.
Turning to our third quarter results.
We reported total revenue.
And our four for $4 2 million compared to $4 5 million for the third quarter of 2021, the year over year decrease was due to lower revenue from VIP enrollments as well as lower management revenue from the <unk> clinics medical integration division clinics, which were offset by increased.
Appliance revenue that we discussed earlier that we recognized earlier in the quarter.
Yeah.
During the third quarter of 2022, we enrolled 56, Vips and recognize revenue of approximately $1 6 million compared to 56 VIP enrollments for revenue of approximately $2 3 million during the same period last year.
Note that the difference in revenue.
With the same number of Vips enrolled is attributable to our new revenue recognition policy, which.
Has the net effect of pushing some VIP enrollment revenue out over a somewhat larger and longer period of time.
Year over year enrollments were impacted by COVID-19 variant resurgence as I mentioned earlier as well as the change in our revenue recognition methodology that we adopted during 2022.
During the third quarter of 2022 appliance revenue rose, 20% due to volume increases as vivo sold 3057 total oral appliance arches for a total of approximately $1 $9 million compared to 2996 appliance arches during the third quarter of 2021.
For a total of approximately $1 6 million.
And for the third quarter of 2022, we had approximately $100000 in center revenue consistent with what we reported in the third quarter of last year and approximately $400000 in our oral phase <unk> functional therapy revenue compared to.
$200000 in the third quarter of 2021 as those services were introduced during the first quarter of 2021.
Gross profit was $2 $5 million for the third quarter of 2020 compared to gross profit of $3 2 million for the comparable period in 2021.
Gross margin was 59% for the third quarter of 2022 compared to 70% during last years third quarter, reflecting higher costs associated with appliances, and VIP enrollments in a longer period over which we are recognizing enrollment revenue.
Sales and marketing expense decreased by $900000 to $1 1 million for the third quarter of 2022 compared to $2 million for the third quarter of 2021.
This decrease is due to approximately $600000.
Reduction in digital campaigns, and approximately $700000 decrease in materials and product samples offset somewhat by expenses related to improving the vivo <unk> website increased sales commissions and additional print media marketing and marketing supplies.
Okay.
General and administrative expenses were approximately $6 6 million for the third quarter of 2022.
Compared to $6 5 million for the third quarter of 2021.
The slight year over year increase was mainly due to the growth of the company combined with higher head count and expenses associated with being a public company as well as increased travel and event expenses related to improving conditions with respect to COVID-19.
Net loss was approximately $5 4 million for the third quarter of 2022 relatively flat compared to the third quarter of 2021, the year over year flatness was due to the factors I just discussed.
Now turning to our balance sheet and statement of cash flows cash burn from operations for the nine months ended September 32022 increased approximately $5 million over the nine months ended September 32021. This increase was due primarily to the increase in our net loss during the period and.
Increase of approximately $900000 in accounts payable and accrued expenses from consulting legal and third party lab fees associated with the increased production of our <unk> appliances.
An increase of approximately <unk>.
$5 million in prepaid expenses offset by a decrease of approximately $200000 in accounts receivable and the return of about a half a million dollars.
A tenant improvement allowance.
Related to the build out of our vivo Institute training facility here in Denver.
For the nine months ended September 32022, net cash used in investing activities consisted of capital expenditures for software of about $700000 related to the development of software for internal use which is expected to be placed in service in 2023.
As of September 32022, the company had approximately $6 $7 million of cash and cash equivalents, which may not be sufficient to fund the operations and strategic objectives of the company over the next 12 months.
Accordingly, the company has been exploring options for suitable additional financing that will replenish our capital resources and help drive our business in 2023 with additional financing as well as additional cost savings measures. We have implemented during the second half of 2022 to address our cash burn we can.
Continue to anticipate having sufficient financial resources to meet our capital requirements Fund operations and continue executing on our growth strategy.
Further as a result of cost savings initiatives, we expect to achieve.
Permanent SG&A expense reductions on a go forward basis.
Additionally, we work to increase our revenues, which Kirk will speak to in more detail momentarily. We also continue to explore differing different types of financing strategies to support growth and extend our cash runway, including other debt financings given our recent stock price performance.
In summary, we are encouraged by recent momentum we've seen in our business that Kirk will talk about shortly as well as increased contribution from newer revenue streams, such as our strategic collaboration with Nexus.
That concludes the financial overview now I will turn the call back over to Kirk to share. Some recent updates and talk about long term growth prospects.
Thank you Brad.
<unk> marks the end of a long and arduous journey over the past six months.
It is almost all of you know and are keenly aware. The net result of our recently completed revenue recognition review was essentially a first quarter revenue adjustment of less than $200000 in our favor.
No.
No restatement of prior years, no findings of managerial misconduct no revelations of wrongdoing.
A minor revenue adjustment and a new formula for pushing the recognition of a portion of revenue further out into the future.
So let me be clear about this without going into all the details in order to satisfy certain highly technical provisions of an accounting standard that even the experts themselves couldnt always agree upon and which required management to make certain highly subjective estimates in the end, we spent six long months and significant financial and time resources.
Only the end up pretty much where we began.
While we are grateful that the outcome was a relatively minor adjustment and then our policies and procedures were improved.
Which will serve us well going forward. It is cold comfort viewed against the time resources and capital markets credibility, which we lost along the way.
Having said all that this long and arduous process is now behind US we do not expect to have any further issues related to this topic. So if nothing else that is cause for celebration.
Now let me briefly review why we believe our core proprietary technology and services platform will continue to disrupt and eventually dominate the global market for breathing and sleep disorders, such as obstructive sleep apnea or OSA.
There is broad acceptance of the ultimate <unk>.
<unk> to address OSA globally Conservative estimates place to market at over a 1 billion OSA sufferers worldwide or about one out of every eight people ironically as diagnostic technologies improve and become more ubiquitous those estimates continue to rise.
Our own rather extensive sleep testing here in the U S and Canada, we see nearly one out of two of all patients testing positive for the condition.
Today, an estimated 90% of OSA patients are prescribed CPAP as the medical gold standard treatment.
When used it can work well, but no one wants to use it every night for the rest of their lives and most patients eventually stop using it after several months.
For patients who are CPAP intolerant or noncompliant.
The next step options are even more limited and less appealing.
So there can be no doubt that for whoever puts forward a clinically effective product or treatment solution at an attractive price point that patients actually want the pay date could be substantial.
In short we have that very thing here today at vivo.
Our products and services meet all of the key criteria.
They work.
They are cost effective.
And when patients are given all the options we find they are preferred over alternative treatments in.
In the past, we haven't been able to prove that to the satisfaction of some.
But just this year, we've moved beyond small or limited studies published an LOE impact journals to larger studies and top tier medical journals, such as sleep medicine, where statistically significant results were achieved.
In the past year vivo has also presented original research on our flagship care.
Our E oral appliance devices at the top three academic sleep medicine meetings in the world The World Sleep Congress by the World Sleep Society Sleep 2022 by the American Academy of Sleep Medicine, and sleep Europe 2022 by the European reach Sleep Research Society as well as at the Greater New York.
<unk> at these conferences.
Conferences vivo as presented to database reviews, demonstrating significant benefits of care device use.
In treating adult OSA and regarding use in the management of pediatric OSA and promoting healthy nasal breathing in children.
We also presented some of our latest data regarding the use of our care devices in the treatment of adult headaches.
Seven additional papers with similarly, supporting data showing statistically significant results have either been published or submitted and our pending publication and other quality peer reviewed journals.
He was created and has begun enrollment in an academic integrated provider program, providing access to academic researchers to study <unk> proprietary products at an open source format.
<unk> also continued its aggressive pursuit of clinical trials and several potential teams and sites have been identified and are in the planning phases.
One noteworthy in very practical application that has come about through our research and ongoing development has been the introduction of a key diagnostic technology called Rhino Manometer.
Recall that <unk> is the exclusive dental market distributor in the United States and Canada.
The only FDA cleared Rhino manometer available.
So we have highly differentiated products and technologies that actually work.
And that had been working program a decade and over 31000 patients we.
We have broad out of network insurance coverage for medical payers as well while.
Well, we haven't had as a therapeutic product line that could address the needs of patients at lower price points.
To address that need we recently announced several exciting new additions to our product line and services to allow far more patients to receive treatment through our provider network.
These new products allow us entry into several new product and equipment categories, where we've never before had a presence. We now have a broader range of price point offerings that are being rolled out that significantly decreases the friction per patient and makes it easier for dentists to get patients into the veeva ecosystem and that stimulates our growth.
With product lines now ranging from diagnostics to CPAP to Mandibular advancement in treatment with all with all of that.
The devices and the vivo <unk> method, we now have a product.
And path for treatment for the vast majority of patients.
We often hear the question if vivo as treatment is so great why haven't many more Dennis integrated Veeva this into their practice.
That's a great question, we often ask ourselves the same.
So it's important to note that our vivo integrated practice or VIP enrollment efforts to date have been focused on attracting only the very best Dennis available.
Those who had the clinical confidence and success to adopt and integrate something like vivo us into their practice. They are typically the ones who get the overall, we'll get the overall picture of what this can mean for their practice and their patients and who see the value in our initial training and enrollment fees that can be as high as $50000.
Now that we've established a broad core network of over 650 vivo strained Dennis across North America. We can now begin bringing in more Dennis at lower introductory prices for limited programs that will attract many more doctors and allow them to test the waters with our company and our products as a direct result of creating many more lower.
Cost points of entry in 2023, we expect to see more dentist than ever before becoming customers of vivo and purchasing products and services.
Keep in mind also the vivo is still relatively new to demonstrate we are roughly where align technology was in their early days as they rolled out invisalign.
And recall that their stock likewise dropped nearly 90% from their IPO price before rebounding the da Vinci, peaking out at over $600 a share.
Adoption of any new medical technology takes time and perseverance inspire medical was first spun out of Medtronic back too.
<unk> 2007.
While both companies currently enjoy much greater valuations that we have we believe our overall market opportunity.
Our products and our technology, our superior and will ultimately prevail in the market.
Keep in mind that important growth pivots for each of these companies came when they begin driving patients who are asking specifically for their products to treat providers.
We are continuing to get our name out so that more and more patients specifically ask for our products in that regard, we recently successfully piloted and rolled out a new program.
Called treatment navigator, which is already showing great promise.
This program supports dental offices and provides each new patient and advocate who assist them in navigating the many different steps involved in the patient journey coordinating medical and dental diagnostic appointments insurance Preauthorizations furthering education.
And treatment planning and generally coaching the patients through treatment.
The treatment navigators role is effectively to act as an extension of the VIP practice, taking a significant load off the provider's team.
Under the guidance of the appropriate health care professional treatment navigators assist and motivate patients to obtain the right treatment for them.
Treatment navigators also leverage the power of our vivo are owed to EHR, which is electronic health record software platform to facilitate communication and collaboration amongst providers to file medical and dental insurance claims and to record patient progress throughout.
You may recall that our vivo arrow to EHR software program is the only full featured medical dental practice management system on the market today configured specifically to accommodate the treatment of breathing and sleep disorders.
Doctors pay additional fees to vivo for our treatment navigator service over the course of 2023, we expect to see this program evolve into a significant revenue and profit source for the company.
Currently we have taken over 70 applications from Vips to join this program and we are systematically rolling this program out across the country.
Our initial results from our treatment navigator pilot tests demonstrate that we can we can deliver a valuable service to our VIP offices.
One of their primary issues of staff shortages and turnover.
Now all they have to do a screen patients coming through their hygiene departments, and then allow the treatment navigator to manage the logistics and get the patient ready for treatment.
In addition, our treatment navigators assist patients who come through our social media website or other marketing campaigns to find answers and get to the get into the veeva ecosystem.
Now I'd like to turn some attention to our Q2 and Q3 results starting with our two key metrics of VIP enrollments and the planned facility.
During the second and third quarters of 2022.
Macro economic factors, including heightened inflation and rising interest rates continued to put pressure on our business and the practices we serve.
These factors along with the lingering impacts of Covid led to dentists, delaying enrollment with vehicles and fewer patients going through the doors of our VIP offices.
This impact has not been limited to Veeva as it's been felt throughout the dental industry.
Other companies in the dental industry have experienced similar challenges due to the economic environment. For example, align technology's experienced a significant decrease in their aligner revenue by 8% quarter over quarter in Q3, and then down 13% over the previous year.
<unk>, we saw our appliance sales peak at an all time record high in June only to fall back somewhat in Q3.
Despite these headwinds we are not satisfied with maintaining relatively flat performance here in 2022 and have taken significant steps to get us back on the path to growth.
To that end, we have reorganized and downsized staffing at all levels, we have made cuts or renegotiated relationships with vendors and whenever possible. We have turned expense line items and the new revenue streams I will discuss these efforts in greater detail here in a moment.
Digging deeper into our performance beyond the income statement there are several noteworthy achievements.
In terms of new provide enrollments, we enrolled 58 and 56, new providers in Q2, and Q3, respectively, and while that's down 12% year over year due to the reasons I just mentioned enrollments in the second quarter increased by 81% over the first quarter.
Also while the total enrollments were relatively flat in Q3, we have increased our sales conversion rate and expect to keep improving upon this trend.
When factor in our improved closing rate is a new zero interest financing program for new Vips. The cost now for a qualified Dennis to become a vivo integrated provider or VIP as now as low as $750 a month.
Moreover, pre registrations for the next year in January February and March for our sleep Medicine Revolution events are nearly sold out having such events fully booked out that far is unprecedented for us and something we see as a favorable trend.
Let's move on for a moment now to home sleep test and case starts which are both key performance metrics.
The vivo score home sleep test, we offered to our Vips from sleep image or a core advantage because they offer an easy and affordable way for patients to obtain a clinically accurate and diagnostic quality assessment of their breathing and sleep.
Vivo score home sleep test for.
Q2, and Q3 of 2022 were two times.
The rate of the same period in the same periods in 2021.
This means that thousands of patients a month are discovering that they have some form of OSA and will need to figure out what to do about it. Our primary task now is to find ways to assist our vips to get those patients into meaningful dialogues about their condition and ultimately closed more cases and get more of those.
<unk> in the treatment that is precisely why we put together our treatment navigator program.
Mile correct enrollments for Q2, and Q3 were up two five times over the same period last year.
The strong growth in this program not only provides a consistent and growing revenue stream for the company, but it also helps patients have a better overall experience with treatment.
Overall, new appliance start new appliance case starts are down slightly from the prior year.
To date, our vips have treated over 31000 patients with vivo method.
<unk> continues to make excellent progress in the dental service organization or DSO channel with active pilots in three DSO organizations, which represent over 457 practices under management.
Pilot programs or starting with four additional dsos.
Representing an opportunity of another 519 locations. We are in advanced contract discussions with an additional 17 dsos representing another 5500 locations.
That's 24 distinct dsos and almost 7000 practices.
Now as many of you know I was the founder of one of the very first Dsos and helped to pioneer the DSO model of providing business and clinical support to independent Dennis.
Over this past summer I was privileged to speak one of the largest DSO conferences. This year, where I shared why Viva is a significant opportunity to the DSO community.
Because the DSO market is so important I'm going to highlight this again also sharing the positive impact of egos.
First.
The DSO corporate model is to acquire practices increase EBITDA and sell at a higher multiple.
Sleep dentistry is the biggest opportunity to increase EBITDA since the liners and implants.
Third a typical DSO practice that screens just two patients per day four days a week with tests 32 patients a month.
Half of those will test positive and have the positive group should start treatment.
Yielding topline revenue of just under $1 million per practice.
Now to understand the impact of this you should know that the field of dentistry has largely become a commodity market with little remaining opportunity for new revenue or margin growth.
Being the case nowhere else in all of Dentistry is there an opportunity to grow that even comes close to what <unk> is offering.
Point number four estimated net EBITDA margins of 30% to the DSO per practice would net the practice $300000 annually since.
Since DSO multiples are typically about <unk> of EBITDA. This one practice could translate to a $3 million increase in the overall DSO evaluation.
Now for a relatively small 35 location DSO the integration of vivo us into their workflow could add $100 million to their firm's valuation.
Point number five.
Now, let's look at the impact of egos, each DSO practice that performs to the above metrics would generate about $192000 in annual revenue for this company.
Point number six.
A moment ago I mentioned three DSO practices that we were in pilot tests with today and that they represent 897 total practices under management.
It's just 20% of those practices became vivo as providers it would add approximately $34 million.
<unk> revenue annual revenue to <unk>.
We see no reason why that number would be limited to 20% and given the compelling economics outlined above we expect much greater penetration over time.
What is becoming very clear from our pilot tests is that the opportunity for vivo.
With respect to Dsos is everything we expected and perhaps even more when coupled with our treatment navigator program.
The ROI for both the for both Dsos and vivo is unparalleled.
Now on the regulatory front earlier this year <unk> was cleared through the Canadian Ministry of Health and Health, Canada to sell devices in Canada with even broader specifications.
And as our research and clinical data becomes more widely accepted more regulatory doors are opening for us.
Excuse me.
In the second quarter of 2022 therapeutic goods administration or PGA in Australia.
<unk> clearances for our devices to treat adults and children for all indications inclusive of OSA regardless of severity.
For those of you not familiar with the TGI. It is Australia is equivalent to the U S food and drug administration.
This is a significant development for us not only does this paved the way in many international markets. But this also provides further validation of our technology.
We continue to move forward seeking clearances here in the U S as well as international regulatory agencies, we are optimistic that our clinical data will continue to be well received and that the necessary regulatory approvals going forward, we will not be a barrier.
Speaking of international markets. We are in late stage negotiations to take our technology into Dubai in the Middle East and are in the early stages of going.
Going into India, and Southeast Asia.
Our penetration into the Australian market is also growing well now that we have full regulatory approval. We note that these opportunities have come to us by way of dentists, and others, who have come to the U S for training at our Institute and and and now desire to take this life changing technology back to their home countries and regions.
So there you have just a glimpse of why we believe the future of Evo has never been brighter.
For the latest research that continues to elevate and substantiate our technology to a revised and streamlined new business model and product lines, which will accelerate our scale up to new and exciting regulatory approvals and worldwide markets, we continue to make strides and progress.
Now, obviously, we will need additional capital to achieve those objectives and realized.
Excuse me.
Realize the potential I've just outlined.
Along the same lines our primary focus throughout this year has been to ensure we position ourselves to achieve positive cash flow as soon as possible to accomplish this we have taken a series of steps to streamline expenses, while also creating new revenue opportunities.
Our internal structures and process processes have been significantly revamped with a focus on near term ROI.
On the cost cutting front, we just assembled the company and reorganized in new ways that we will that we believe will be more efficient and cost effective going forward.
Vendor relationships have been reassessed and or renegotiated what were once expense line items have now been turned into revenue opportunities wherever possible.
The net effect of all of these efforts has been a reduction approaching $1 billion per month, and our cash burn from its peak in the first quarter to where we are today.
So we expect to see the impact of our new revenue streams gradually take shape throughout 2023 and contributes significantly to our profitability as.
As previously mentioned our goal is to achieve cash flow breakeven in the next 12 months to 18 months.
Meanwhile, we're doing everything we know how to be great stewards of the capital we have available and as Brad mentioned, we have been exploring additional financing options. We believe we have a good solution available and we hope to announce something in the near future.
Another important result of the reorganizing of our business from the ground up has been a general simplification and what we do and how we do it our training is more streamlined and intently focused on essentials, so that ramp up times for new providers or as brief as possible our messaging to the world at large as crisper and clearer.
Patients in search of real solutions are finding us and being directed individuals trained practices.
Over the past several months, we have been aggressively pursuing additional capital financing options and as I said, we hope to have something.
To announce on that front very soon.
The company.
Yes.
Has been actively exploring options for suitable additional financing that will replenish our capital resources and helped drive our business plan forward in 2023.
In prior earnings calls, we highlighted our strategic pivot towards direct to consumer marketing efforts that began in the latter part of 2021 today I am pleased to announce that working in close collaboration with our marketing partners. We have successfully piloted a marketing initiative to drive more new patients.
More new patients into vivo strained provider practices and to generate more case starts. This program has exceeded our forecast and is consistently delivering between 30 and 50 qualified new sleep apnea patients per month into each participating office to put that into perspective that number of total new patient.
Would be above average for a typical general dental office.
We are beginning to roll this new consumer marketing program out to our entire VIP provider network.
From a company standpoint, we could see a significant financial impact across the board with almost no incremental investment.
Also along the direct to consumer front.
We are announcing the formation of an independent firm called tooth pillar.
That seeks to leverage social media influencers to generate awareness of the many benefits from the use of our highly effective vivo skies in guiding the craniofacial growth and development of pediatric patients.
Their stated goal is to put 25000 children into treatment using <unk> products.
This company is led by some of our most prolific and supportive vivo doctors and former company executives, who have witnessed firsthand over several years, just how impactful and life changing our products can be.
<unk> is the exclusive supplier of products to two floor.
Finally, more of our VIP should begin to receive greater reimbursements going forward because more patients will now be eligible to have coverage for their view of his treatment.
This is due in part to a strategic alliance vivo recently entered into with a company called Nexus dental systems to create what is expected to be one of the most comprehensive medical billing services in the dental industry.
This collaboration is expected to provide both both companies both companies provider networks with greater access to both in or out of network billing with all major medical insurance companies facilitating case acceptances.
Excuse me.
Insurance billing procedures and reimbursement again this creates an additional important revenue stream for veeva.
We believe that these combined efforts will create additional awareness with anti <unk>.
Improve VIP enrollments case starts in revenue.
In closing, we believe our future remains bright for the reasons I just outlined above.
We continue to grow despite a challenging environment, we have a number of initiatives underway to drive additional revenue growth increased VIP enrollment expand our offerings and open up new revenue streams for vivo include.
Including our recent collaboration with Nexus.
At the same time, we are conscious of cost and taken the necessary steps to generate permanent cost savings, while shortening our path to cash flow profitability, we intend to stay the course and look forward to updating you on our progress again, we want to thank our shareholders for their patience as we work through our recent Rev Rec challenges.
This is now behind us with a positive outcome and our eyes are squarely focused on the future.
And with that we can begin our Q&A session. Operator. Please go ahead.
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Okay.
And our first question comes from the line of Scott Henry with Roth Capital. Please proceed with your question.
Thank you and good afternoon.
Obviously I'll go through the 10-Q, so I'll keep my.
<unk> relatively general.
Hi.
Second and third quarter revenues looked about $4 million range, which imply a.
Annual rate of about 16 million.
I guess the first question is what do you think you would expect for an organic growth rate.
When you think about Q4 this year in the first half of next year.
How do you expect that growth.
What kind of range should we be thinking about.
Well Hello, Scott. Thank you for the question I would say that what we what we have seen throughout this year has been.
As we mentioned earlier in the year there were some headwinds associated with what we were doing it seems to have lightened up we seem to see.
Sort of.
Of rebounding effect going on here in the fourth quarter and.
We hope to see that extend into next year.
I would say that the impact of.
The staffing issues that occurred during COVID-19 continue to plague dental offices, and we think that with R. R.
Treatment navigator program that we'll be able to mitigate some of those some of those effects. We also what we don't know yet is how quickly. Some of these new revenue streams will ramp up for us, but I would expect to see us ramp up over the course of next year and a very organic way to wear.
We would be well above the $4 million threshold certainly by this time next year.
And I realize that's what we have that's what it was this past year.
But I would expect to see these other revenue streams kick in and I think that can be somewhat substantial.
Okay.
Maybe another way to ask a similar question.
You talked about cash flow breakeven in 12 months to 18 months.
What rate of revenue do you think gets you there.
If you think about your first breakeven quarter and annualize that revenue number.
What do you think that is.
Well I think the run rate number is probably in the neighborhood of $25 million, perhaps $30 million I think as we look at our forecast internally, that's probably what it's going to take to get to cash flow breakeven for us.
So again, we've we've trimmed out a lot of a lot of costs. We think we can we can run pretty lean and still grow grow revenue.
And we will continue to evaluate this literally on a on a month to month basis as we go forward.
Okay. So would you say.
Gross margins.
Kind of trending around 60% right now they used to be higher than that what do you think is more reflective going forward the 60% range or do you think it will be back to 70%.
My guess would be would be somewhere in the 60% range going forward, we have some opportunities to improve that.
But I think.
To be safe and Conservative I would say right now.
I don't see I don't see where the margins will I don't see a lot of further erosion, but I think for I think 60% is probably is.
Conservative.
Gross margin.
Forecast.
Okay.
So im just kind of doing the math in my head, 70% gross margin and $7 million a quarter.
Getting to breakeven.
<unk> you probably have to cut another $2 million out of expenses is that a fair assessment do you think.
Do you have room to cut that out or I mean.
Either you cut it out or you grow into it with leverage but you have.
To breakeven at $7 million, a quarter I think you're going to have to make some cuts.
That fair.
I think that's that's that's fair on the back of the napkin.
So, let's see what happens we have some pretty high margin revenue streams coming online, which we hope will improve our margins a little bit further so let's see what happens we've got we've got room to yet to go to cut expenses, if we need to and we're prepared to do that as we evaluate month by month going for.
<unk>.
Okay great.
Great I'll wrap it up there and talk after going through the 10-Qs. Thank you for taking the questions.
Thank you Scott.
Okay.
And our next question comes from the line of Alex Nowak with Craig Hallum Capital Group.
<unk>, what's your question.
Okay, great. Good afternoon, everyone. Maybe to continue there can you expand a little bit more on the cost cuts that you do want to take place the ones that you have planned the ones that you would take if you absolutely need to and just the thoughts around those cost cuts and how it would or would not impact revenue growth on the go forward.
Yes.
So what we what we've done is as I mentioned and I don't know at this point came across clearly or not but we've we've really reorganized from the ground up and have taken a sort of a ground up approach of things. So we were we had opportunities to.
Eliminate positions or personnel, we did that in and we're largely.
We took into account our.
Our practice advisory model, which was the.
The source of a lot of our overhead you remember.
You might remember this Alex that we in Q1, we spent a lot of time gearing up our practice advisory services in order to.
Send people out into the into the market to retrain some of the staff.
People that had been lost by the dental profession and in some of our best providers had just lost their teams and they were just they stopped producing so we geared up and we probably.
Took on a lot of a lot of overhead related to that debt that we found a better way with this.
With our treatment Navigator program, we've turned that expense line item into a profit center. So we let some of the <unk>.
After that initial surge we let some of the of the practice advisors go and we turned the remaining ones over into treatment navigators and the treatment navigators actually as they as they pull patients through.
The process of getting into treatment that actually turns into a profit center for us. So we took a raw overhead and turned it into a profit center. So I would say that that that single effort, which is still nascent.
And coming out of the gate here, its not showing up in our third quarter, yet because thats when that was the quarter. We started piloting this but here in the fourth quarter and going forward.
It's got a nice margin too at the service has a good margin to it we have a tremendous amount of interest in it and we think that'll be a good thing going forward now.
Having having made those cuts as that program comes back online.
As it grows rather we're going to we're going to need to hire more.
Treatment navigators, so, but these treatment navigators will be hired.
To be immediately.
Accretive and profitable to the organization, so, whereas we didn't have a clear ROI on our our practice advisor group. We now have a very definitive and defined ROI on these new treatment navigators going forward and so we think that that's going to help a lot.
New product lines that we brought on board the growth of our Milo correct services, which has pretty good margins the growth of our of our billing services.
Think those things will allow us to grow organically and as we add staff going forward in the future it will be because the demand is there.
And we can deploy.
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Personnel with an immediate ROI attached to that so.
Hopeful that that is the.
The model will be able to execute on and that's what our mandate is everything has been.
Geared now towards short term ROI and immediate.
Accretive.
Deployments of resources and personnel. So that's how I would answer that.
Alex one other this is Brad one other add ons.
Hey, Brett one other item to what Kirk said.
And our vivo score a ring.
<unk> in 2021, we use veeva scores the loss leader in really a tool to help VIP has hit the ground running and startup there screenings of their patients and 2022, we initiated six months of no cost lease.
Included with the VIP program.
The enrollment program and then we start charging them after the six months $79 95, a month per rig.
So we can start to turn that loss leader.
<unk> business model into a revenue generator.
And we're starting to see the revenue from those releases starting to.
To grow here in the last half of the year.
Yeah.
Okay understood and then maybe refresh us on the Big studies to watch here going forward I know there was a Stanford head to head study going against CPAP, just any update around the big studies any other head to head phase and we should be watching.
Well, we've been supremely frustrated over the the Stanford trial progress.
It's a bureaucratic.
Nightmare to get through that I can't really tell you what the status is because.
Honestly, we don't know we keep.
Nudging them, along and trying to get everything accomplished through the through the administrative process that they have there.
With their internal IRB et cetera, and it just seems like Theres one roadblock after another.
So we are we're continuing to look at that we're continuing to I mean everyday we effectively compete against alternative treatment modalities.
We and every day, we take patients out of CPAP.
Get them off their CPAP machines, we.
We compete in the real world against inspire and against all of these other treatment modalities everyday.
To give some to get some hard data on that one of the things we mentioned, but we didn't elaborate on.
Is it we're establishing a university based.
Research network of.
The University researchers that we'll be able to conduct open source research using vivo products and they can they can pick and choose how they want to do that so if they want if they want to put a put a research project together that compares vivers against CPAP or against other alternatives.
Modalities than they they can certainly do that we are supremely confident in the efficacy of our treatment and protocols and so we've opened it up to in an open source format. We've had good response from several different universities dental department and others to conduct this research.
We're very excited about that going forward. So I wish I could give you some good news about Stanford.
Because it's one we've talked about it feels like we've been talking about that every quarter for the last two years and it just it just seems to just die in the bureaucracy. There at Stamford, We have we had to rewrite the protocol about <unk>.
Six or eight months ago, but it just doesn't seem to get any traction. So we're going to continue to look for alternatives, we have some ideas around.
Other institutions, if we can't get that particular study to go through a Stanford we've had some inquiries from some other institutions to do similar work. So we will keep that up.
Research is an important part of what we wanted to do here, obviously with the seven pending papers Theres a lot of stuff. That's gone on when you see what we're what we're about to publish and release I think youll be very happy with what we will be able to say.
It'll help our regulatory environment. It will help power our credibility with payers, it's just going to lead to a lot of good things.
Okay understood I appreciate it thank you.
You bet.
And we have reached the end of the question and answer session I will now turn the call back over to management for closing remarks.
Well, we would just like to thank everyone for being here. This afternoon.
Apologize for my voice.
Under the weather today and I appreciate you very with me as I cough through some of these things.
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Look we believe that our future remains bright for all the reasons that we've just outlined.
We continue to grow we continue to.
Navigate a challenging environment.
We look forward to sharing our continued progress with each of you in the future.
So thank you and have a great day and happy holidays.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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