Q4 2022 Vivos Therapeutics Inc Earnings Call
Word such as aim.
Oh, I'm, sorry, I'm I would also like to remind everyone that today's call will contain certain forward looking statements from our management made within the meaning of section 27, a on the Securities Act of 1933 as amended and section 21 E of the Securities and Exchange Act of 1934.
Four as amended concerning future events word such as aim may could good projects expects intends plans believes anticipates hopes estimates and variations of such words and similar expressions are intended to identify forward looking statements.
These statements involve significant known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant risks uncertainties and contingencies, many of which are beyond the company's control actual results, including without limitation the results at vivo.
Gross strategies operational plans, including sales marketing product acquisition and integration research and development regulatory initiatives cost savings plans and plans to generate revenue as well as potential results of operations and operating metrics and other matters.
To be addressed by vivo management in this conference call may differ materially and adversely from those expressed or implied by such forward looking statements factors that could cause actual results to differ materially include but are not limited to the risk factors described in other disclosures contained in vivo.
<unk> filings with the Securities and Exchange Commission, including the risk factors and other disclosures in our Form 10-K for the year ended December 31st 2022, which was filed with the SEC today and our other filings with the SEC all of which will be accessible on the investor Relations section of vivo.
Website as well as the SEC website.
Except to the extent required by law vivo assumes no obligation to update statements as circumstances change finally, please be aware that the U S food and drug administration has given certain vivo suppliance appliances, five 10-K clearance to treat model mild to moderate OSA in adult.
Any reference herein regarding ddos treatment or the vivo treatment method should be viewed in this context.
Treatment of patients with severe OSA are performed off label at the sole discretion of the treating doctor and are not part of the V. Those treatment protocol now at this time. It is my pleasure to introduce her huntsman chairman and CEO of vivo Kirk. Please go ahead.
Thank you Julie.
I want to thank you all for joining us on today's conference call.
Just a moment I'll turn the call over to our Chief Financial Officer, Brad Ami.
He will walk you through the highlights of our fourth quarter and full year 2022 financial and operating results.
One spread is finished I'll come back on and speak with you about the latest developments that'd be Bose.
First I'll quickly talk about 2022, the challenges we faced including the revenue recognition review process today, so much of our time last year.
And then also briefly mentioned some of what we accomplished in spite of these headwinds, including the actions we took to broaden our product offerings and distribution channels, and importantly to increase operational efficiencies and improve our cost structure in order to work more efficiently with dentists and medical professionals in a post COVID-19 world.
Then I'll take a few minutes to talk about 2023, what we've already been able to achieve in just a few months.
What we expect to accomplish during the rest of the year. This includes our recent acquisition of product rights and patents from advanced facial don't mix, which has expanded our product line, our product portfolio as well as our revenue potential by opening deals up to a much broader patient base. After that we will be happy to take your questions.
Now, let me turn it over to Brad to review our financials Brett Brad. Please go ahead.
Thank you Kirk and good afternoon, everyone. Today I'll review, the financial highlights of our fourth quarter and full year 2022 financial results.
Yeah.
For information on our results for the 12 months period ended December 31, 2022, I'll refer you to our earnings release, which was distributed earlier today and our annual report on Form 10-K, which will be available on the SEC filings portion at the Investor Relations section of the vivo <unk> web site at WD.
W. W Dot vivo dotcom forward Slash Investor Das relations.
Today, we reported fourth quarter 2022, total revenue of $4 million compared to $4.4 million for the fourth quarter of 2021.
The overall year over year decrease was due in part to total lower revenue from Devos integrated provider or VIP enrollments.
On a positive note we saw increased product revenue during the quarter as well as increased revenue generated year over year from billing intelligence services oral facial mile functional therapy, known as O M T and.
And increased sleep testing service revenue.
It is critical to note that a material portion of the decrease in VIP enrollment revenue reflects a deferral of approximately two and a half million dollars VIP enrollment revenue into future periods under our new revenue recognition policy.
We expect to recognize all of this revenue over the next 17 months as we fulfill our obligations under our VIP contracts.
In fact, our actual VIP enrollments were up 43% in the fourth quarter with 50 Vips enrolled versus 35 enrolled in the same period last year.
But our new policy has the net effect of recognizing a significant.
Significant amount.
Our VIP enrollment revenue over time.
Which for this year only creates a bit of an apples and oranges effect for comparison purposes. Our revenue recognition policy also has the effect of allocating enrollment revenue to other service and product revenue categories based upon various performance obligations included in the enrollment contracts.
As we consistently apply a revenue recognition in 2023 and beyond the year over year comparisons will ship back to an apples to apples comparison.
Year over year revenue growth was also impacted by the effects of COVID-19, Delta and omicron variance resurgence is towards the end of 2021 and persisting throughout 2022.
These resurgence has presented challenges for the dentist offices, which were operating at lower capacity and with limited staff.
For further details on our revenue recognition policy as it relates to ASC topic 606, I refer to you to today's Form 10-K filing.
As we noted on our last Investor call in December while the revenue recognition exercise. We went through last year was drain on a number of levels. The good news is that the actual impact.
On our company and on our historical results of operations was relatively limited, including that no prior audited financial statements required.
Restatement.
Also on the good news front during the fourth quarter of 2022 product revenue increased 21% due to price and volume increases as we saw 2938 oral appliance arches for approximately $2 million compared to 2000 and 707 during the fourth quarter of 'twenty two.
'twenty, one for approximately $1.7 million.
And for the fourth quarter of 2022, we recognized approximately $200000 in our billing intelligence service revenue consistent with what we reported in the same period, the prior year and $100000 in O M. T revenue again, consistent with the comparable prior year period.
Yeah.
For full year 2022 revenue was $16 million compared to $16 9 million for the full year of 2021. This decrease of approximately $900000 was primarily attributable to the same factors I just mentioned, including 400000.
Due to a prior year revenue recognition adjustment and 300000 due to the increase in the average price of VIP enrollments.
During the 12 months ended December 31, 2022, we enrolled 196 VIP is net of cancellations for revenue of approximately $4.8 million compared to 197 Vips.
And revenue of eight and a half million dollars for 2021.
Of the 3.7 million dollar difference 700000 was related to the items I just mentioned.
800001 point $8 million related to 'twenty, 'twenty, two and 2021 allocations of performance obligations to other revenue categories respectively.
During the year ended December 31, 2022, we sold 12281 oral appliance arches.
For revenue of approximately $7 8 million, a 29% increase in appliance revenue and an 8% increase in the number of appliances shipped compared to the year earlier, when we sold 11355 world of appliance arches for.
Core revenue of approximately $6 million.
Again, the increase in product revenue was due to both price and volume increases as well as ASC 606 allocations from enrollments.
And for the full year 2022 we had approximately $600000 in center revenue compared to approximately a half a million dollars for the prior year.
And approximately $900000 in O M T revenue compared to $300000 in 2020 one due to the introduction of this service in 2021 and increased demand for these services, resulting in a three X increase you're over a year.
We are optimistic that the demand for our O M T offering will increase further this year, creating more revenue potential for ddos.
Gross profit was $2 $4 million for the fourth quarter of 2022 compared to gross profit of $3 1 million for the comparable period in 2021.
Gross margin for the fourth quarter of 2022 was 60% compared to 71% during last year's fourth quarter.
Primarily driven by higher costs associated with increased sales volume of our employee of our appliances and increased in the cost of raw materials.
And VIP enrollments as well as costs related to our new programs, including the sale and leasing of sleep image rings N O M T.
For the year ended December 31, 2022, gross profit was $10 million compared to gross profit of $12 6 million for the comparable period in 2021.
Gross margin for the first for the full year of 2022 was 63% compared to 75% for the full year of 2021 the year over year difference was due to the same factors I just described.
Yeah.
We continue to refine our sales marketing and promotional efforts with potential vips not only to increase enrollments and revenue but to improve our gross profit and margins. This includes utilizing targeted social media and digital marketing efforts, specifically designed to drive sales.
Sales and marketing expense.
It was $1.3 million for both fourth quarter, 2022, and 2021.
Sales and marketing expense decreased by over $200000 to $5 3 million for 2022 compared to approximately $5 6 million for 2020, one primarily due to reduced expenses related to the annual breathing wellness conference and expenses related to the <unk> website.
General and administrative expenses were approximately $6 $9 million for the fourth quarter of 2022.
And approximately $29 million for the year ended December 31 2022.
Compared with approximately $9 million for the fourth quarter of 2021, and $25 8 million.
For 2020 one.
The lower corner quarter over quarter expenditures reflects our cost cutting efforts in the fourth quarter of 2022, as well as lower bad debt expense, Jenny insurance and banking fees.
The year over year increase was mainly due to higher head count throughout the year as well as increased travel and event expenses related to improving conditions with respect to COVID-19.
Net loss was $6 $1 million for the fourth quarter of 2022 compared to seven 4 million for the fourth quarter of 2021.
The year over year decrease in net loss was primarily from lower G&A due to expense cuts and the factors I just discussed.
Net loss for the year ended December 31, 2022 was $23 8 million compared to $20 3 million for 2021.
Turning to our statement of cash flows.
Cash burn from operations for 2022 increased approximately $3.9 million compared to 2021.
This increase is due primarily to the $3 6 million increase in our net loss during the year.
For the full year 2022, net cash used in investing activities consisted of capital expenditures of $900000 related to the development of software for internal use which is expected to be placed into service in mid 2023.
As of 12 31, 2022 we had three point my $3.5 million of cash and cash equivalents. It's important to note that the total cash burn in 2020 to decrease throughout the year from $6 2 million in the first quarter to $3 2 million in the fourth quarter.
From the third quarter of 2022 to fourth quarter of 2022 total cash burn decreased 2.7 million quarter over quarter due to the effect of our expense cutting measures.
In January 2023, we augmented our liquidity by closing a private placement with a single institutional investor for net proceeds of approximately $7 $4 million.
The private placement consisted of shares of common stock and pre funded warrants together with five and a half year of common stock purchase warrants with an exercise price of $1 20 a share.
The effective purchase price per share of common stock or pre funded warrant in lieu thereof, and associated warrants was $1 20.
With this financing as well as additional cost savings measures, we have been implementing since the latter part of 'twenty 'twenty. Two we continue to anticipate having sufficient financial resources to meet our capital requirements Fund our operations and continuing.
<unk> executing on our growth strategy in the near term.
Once our cost savings initiatives are fully implemented we expect to achieve permanent SG&A expense reductions on a go forward basis.
Longer term, we will be required to obtain additional financing and expect to satisfy our cash needs primarily from the issuance of equity securities or debt indebtedness in order to sustain operations until we can achieve profitability and positive cash flow.
We continue to explore different types of financing strategies to support our growth and extend our cash runway, including potential debt financings given our recent stock price levels.
In conclusion.
Following what we view as a challenging but still only slightly down 2022 or 'twenty 'twenty. Three plan is to continue with our cost savings measures. While at the same time working to realize increased contribution from current revenue streams and also implementing new products and revenue streams to accelerate our revenue growth prospects.
Kirk will discuss these in more detail with you shortly as well as share some recent updates and talk about our long term growth prospects now.
Now I'll turn it over to Kurt.
Thank you Brad.
As I mentioned earlier in many ways 2022 was a challenging year for Veeva. This is Brad just discussed our reported GAAP revenue was down slightly year over year as we've confronted a number of challenges as we previously noted unexpected immaterial portion of that revenue decline was due to our new ASC 606 revenue recognition part.
Alison.
Otherwise the biggest issue we faced was the lingering effects of pandemic, driven dental work force disruptions, which corresponded to fewer patients walking through Dennis stores.
Combined with an economy reeling from inflationary pressures and higher interest rates. These issues were pervasive and their impact on our business in 2022.
I talked at length about these issues on our last conference call. So I won't rehash them here again in any detail.
Aside from these short term challenges and in some ways as a result of having faced them.
In 2022, and early 2023 we've achieved several significant accomplishments.
We believe these accomplishments have laid the foundation for vivo to move forward in a more focused and productive way.
Suffice to say that largely because of that adversity, we seize the opportunity to refine our strategy and transform our business model in very important ways.
We believe those challenges will allow us to diversify beyond our previous reliance on the dental industry, while enabling us to more rapidly scale our business going forward.
Here are the primary changes, we've made and accomplishments we've achieved in laying the foundation for our future growth.
I'll run down the list quickly and then elaborate on each of them further thereafter.
Number one.
Over the course of 2022, we cut our cash burn by more than half with further reductions anticipated ahead from Q3 to Q4, our cash burn was reduced by more than $2 7 million.
We reorganized number two we reorganized and redeployed our operations and support teams.
Three we reorganized our direct sales team and put them under new leadership.
Number four we overhauled and extended our service and product lines. This means easier access to vivo for far more dentists, who will be able to offer more options to patients.
Five we introduced a new streamlined training program that to date has resulted in a threefold increase in vivo Dennis productivity.
Six we tripled revenue from our O N T treatment services this past year.
Seven we published multiple exciting new papers, one of which showed that 80% of patients had their OSA symptoms completely resolved.
Eight.
We obtained new regulatory clearances in Australia, and the United States, including FDA 510 clearance for the DNA appliance as a class two device for mild to moderate sleep apnea.
We continue to see success in our DSO market penetration and value proposition.
10, we initiated discussions with several large durable medical equipment companies known as <unk>, who collectively have hundreds of thousands of CPAP failure patients looking for alternative solutions.
11, our medical integration Division now have seven open locations and we are now just beginning to derive patient case volume in management fees from the new some near clinic operations there.
First over the past several months, we have substantially improved our cost structure and operating efficiencies throughout our entire organization.
This effort entailed staff reductions renewed renegotiated or terminated vendor agreements and policy changes.
We also created additional revenue opportunities across our service and product lines on the services front. In addition to our VIP program. We now offer additional lower cost options for dentists to become vivo providers dentists.
Dentists can now become limited vivo providers for as little as $7995.
For example, if a dentist's only wants to use our new mandibular advancement oral appliances and not our care devices.
They can now enroll for limited low time or a low one time fee and if at some point down the road they want to learn to do more than they can upgrade to a full VIP program.
We have also turned our vivo institute facility into more of a revenue generating asset by hosting a number of paid medical dental related trainings and courses.
Our annual breathing wellness conference will also be a profit oriented industry sponsored professional education event, rather than a heavily subsidized sales events. We've had in the past these.
These changes to our operating model and practices will begin to reflect in our revenue beginning this year.
During 2022, we entered into a strategic alliance with Nexus dental systems to create what is expected to be one of the most comprehensive medical billing services in the dental industry.
The net result is that vivo providers and their patients will now receive much higher insurance eligibility and reimbursement on vivo suppliers, which we expect will lead to greater case volume and higher revenue for vivo we.
We are hoping that our alliance with Nexus will have a positive impact on appliance case starts as 2023 progresses.
In the latter part of 2022 we launched what we refer to as our treatment navigator program.
Treatment navigators will engage with patients very early on in their OSA journey.
Under the instruction of the treating doctor to educate them about their condition and discussed with them. The available treatment options that the VIP practice has determined best suited for that patient.
The treatment navigators role is to effectively act as an extension of the VIP practice to guide the patient through the many different steps involved in the patient journey, including coordinating medical and dental diagnostic appointments insurance Preauthorizations further education and generally coaching the patients through treatment under the.
Directionally the treating doctor.
This service removes a significant workload from the practice and helps mitigate the risk associated with employee turnover dentists appreciate the consistency and continuity that comes through working with treatment navigators and they pay vivo for their services as the practice starts new cases.
In this infancy stage of the program, we already have just under 50 VIP offices enrolled in the program and expect it will continue to grow rapidly as more doctors see the benefits.
On the oral appliance product front and after a great amount of research and product evaluation, we expanded our product suite. So that our vips have more tools in their toolbox to treat their patients breathing related sleep disorders. In addition to our proprietary care devices that form the core of what we call. The <unk> method, we now offer vips.
Other palliative oral appliances, such as traditional Mandibular advancement devices in today's economy treatment with the care or care devices can be cost prohibitive for some patients having appliances available at lower price points allows VIP to vips to treat more patients.
As many of you are likely aware earlier this year, we acquired the intellectual property and assets of advanced special dynamics LLC.
This acquisition involves several U S and foreign patents three of which were newly issued in the past few months as well as product rights trademarks regulatory approvals and trade secrets.
The primary patented technology, we acquired is called unilateral bite block technology.
And the primary product is called the preventive oral device also known as the pod.
Although the nature of the patents allows for the application of the core technology across any oral appliance type, including the liners mandibular advancement devices Orthotics splints etcetera.
The pod currently has FDA regulatory clearance to treat T M D and bruxism.
Both of which are highly correlated with the presence of obstructive sleep apnea headaches pain cranial distortions oral facial distortions fatigue breathing disorders and more.
A second device, we acquired called the night block incorporates the same unilateral bite block technology and is a mandibular advancement device. It is likewise highly effective and easy to use for both my other moderate OSA and T. M D bruxism.
The primary benefits of the pod are that it is extremely easy to fabricate and deliver by dentist, it's safe and comfortable to wear and it has a relatively low cost to patients while also being profitable for both devos and providers.
Dennis can be trained via an online course on the on the clinical use of the pod and well under two hours and pods will be manufactured by our existing manufacturing partners.
We are also initially initiating a more robust two day life course at the Devos Institute, where we teach and explore the biological mechanisms of action behind the par technology.
We will continue to seek further regulatory approvals for additional indications of use for the pod, including upper airway resistance migraine, headaches, and anxiety depression and obstructive sleep apnea.
According to published reports over 80 million Americans suffer from T M D related disorders.
Now with the pod vivo is in an excellent position to help these patients.
We expect the pod along with other devices based on the same technology to become featured components of the vivo method right alongside our proprietary care devices.
They fill a critical gap in the overarching products that we've traditionally offered here and they are more manageable for dentists, who may not want to learn the use of our care devices.
We believe pods will have.
A particular appeal to dental service organizations notice Dsos, who are looking for revenue enhancement opportunities that are easy to train and deploy simple and easy to use and very cost effective for patients. The pod checks all of those box as well.
To our knowledge there is nothing like the pod on the market today.
As a direct result of these revenue and expense initiatives that I've described our monthly cash burn has decreased from a monthly high of $2 5 million in the first quarter of 2022 to now just a little over a million dollars. We expect this amount will continue to decrease as we move throughout 2023 and as the full impact of our cost cuts and new.
Revenue lines start to kick in.
As we have previously stated our goal is to become free cash flow positive by the middle of 'twenty 'twenty four.
We very much remain on that track and we are enthused and encouraged by the opportunities we see in support of that goal.
Speaking of Dsos vivo also continues to make excellent progress in that space. We now have active pilot programs with six different DSO organizations, representing just under 1000 dental offices.
Broadening our product suite also allows us to offer dsos different entry points to integrate vivo into their practices. We are currently in advanced discussions with an additional 28 dsos representing several thousand additional crackers.
In our last call I walked through the economics of both the DSO for both the DSO and Devos I'll.
Jump to the takeaway in this call, which is that by working with <unk>. We believe a single DSO practice can add about $1 million in annual revenue and $300000 in EBITDA per year.
That same practice will generate approximately 200000.
In additional annual revenue for vivo.
I'd, rather average sized DSO was 100 offices participated in in vivo could add $20 million annually to vivo as topline revenue.
There are roughly 2600 dsos operating in the U S to today across 40000 locations.
Turning to durable medical equipment companies also known as <unk>. These companies fulfilled medical.
Prescriptions for CPAP machines, and supplies and monitor their usage.
Every month in the United States. There are over 200000, new CPAP units delivered to patients and every month. There are significant portion of CPAP users, who are intolerant or noncompliant.
<unk> company of even modest size has thousands tens of thousands or even hundreds of thousands of set of failed CPAP users and their databases.
Up to this point the D and the companies have not had any viable alternatives to recommend and redirecting their CPAP failure patients to independent Dennis has not been successful.
Recently, however, D&B companies have engaged in discussions with Veeva is to leverage our nationwide network of approximately 1700 trained dentists in order to help their CPAP failure patients obtain oral appliance therapy for their OSA patients.
If ignored OSA certainly can get worse, so noncompliant CPAP users need an alternative that is more tolerable.
As the vivo distributor.
Do you mean company can readily assist such patients, while making a nice profit margin with minimal overhead and expense.
<unk> is currently in active discussions with a number of the leading <unk> companies operating in the United States and we expect that in time this will be a another strong revenue source for us.
In 2022, we also continued to make important progress with our research and published studies.
In July of 2022 vivo has published a landmark study in the peer reviewed medical Journal sleep Medicine.
This study demonstrated convincingly, perhaps for the first time with this kind of credibility.
The ability of our care appliances to significantly reduce OSA in 63% of patients and resolve OSA.
OSA symptoms completely minions, and H I have less than five and 26%.
Final results were obtained without any active intervention, which is radically unlike any results reported with other devices simply because such devices much must be activated and in place to produce a clinical result.
To date, no relapses or reports of HR, increasing after treatment from patients in any of our studies have been reported.
We know of no other technology or product that can make any such claim.
Other studies conducted over the past several years of firm and support that major study and sleep medicine.
The latest data.
Which we submitted to the FDA showed 80% of patients who used only the DNA appliance along with our proprietary mile correct therapy, which is all part of the vivo method.
And H I have less than five post treatment, which means no further obstructive sleep apnea.
Now in that case, the sample size is relatively small so we should not infer too much from that single group.
Excuse me.
Nevertheless, this is a promising development.
And one that generally comports with prior studies showing significant rates of full resolution of OSA and study cohorts.
We have submitted this latest data as a peer reviewed public paper.
To our knowledge no. Other treatment method has ever shown anything close to that level of efficacy without lifetime intervention or surgery.
Our research and clinical data also continues to open more regulatory doors for us in 2020 to Veeva was cleared through the Canadian Ministry of Health Health, Canada to sell devices in Canada with even broader specifications also the therapeutic goods administration or T. G. A in Australia.
Clearances for our devices to treat adults and children for all indications it inclusive of OSA regardless of severity.
For those of you not familiar with the T. G. A it is Australia is equivalent to the U S food and drug administration.
And just before the end of last year of the votes received a brand new FDA clearance for our proprietary DNA appliance.
The FDA five 10-K clearance for the DNA appliance is a as a class two device gives rise to a completely new treatment regimen for mild to moderate OSA in adults and job repositioning. This is an important milestone for vivo as the DNA device for palatal expansion is our longest standing.
Appliance with the widest use among vivo strained Dennis the DNA is the only oral appliance ever to receive FDA clearance to treat OSA without mandibular advancement as its primary mechanism of action.
We are extremely excited about receiving this FDA clearance and we expect this will lead to continued market adoption of the DNA for treating OSA.
One noteworthy in very practical application that has come from our own ongoing research and development has been the introduction of a key diagnostic technology called Rhino Manometer.
In June of last year, we announced the deal with G. M instruments, where vivo became the exclusive dental market distributor in the U S and Canada for the only FDA cleared Rhino manometer available.
Finally during 2022, our medical integration Division continued to expand and establish our partnership with new medical dental sleep clinics, known as disarming and disarm the a plus centers.
In late 2020, we launched our medical integration division to assist VIP practices to establish clinical collaboration ties to local primary care physicians sleep specialists E N T doctors cardiologists.
Pediatricians, Pulmonologists and other health care providers, who routinely see or treat patients with sleep and breathing disorders.
The primary objective of our M. I D is to promote the vivo method to medical providers through education on our local and national basis, thus facilitating the potential for additional OSA adult patients gain access to the vivo method, while offering continuum of care.
These independent clinics that are owned jointly with medical doctors and dentists or just medical doctors, depending on local state regulations will be managed by our company under a management and development agreement, which pays a 6% to 8% of all net revenue from sleep related services, we all still collect a development fee for each.
Clinic prior to opening which establishes all operational protocols and flow in.
In addition to the five operating Usama clinics operating at the end of 2022 here in the first quarter of 2023, we are gearing up to open two additional clinics in Las Vegas, Nevada in the past six months the medical integration Division has consolidated operations, thus improving operational flow, which in turn has produced significant.
Creases in case starts in management fees looking ahead, we expect to add too.
Additional new some new clinics in 2023 and with the additions of New service lines. We expect these clinics will deliver revenue opportunities for vivo spoke in terms of management and development fees as well as appliance sales.
Now here in 2023 in addition to the developments I talked about earlier, we have also been focused on improving our sales and marketing efforts, we made excuse me.
We made some organizational changes streamline processes and implemented new training and leadership in the sales organization.
Part of these changes was to create and implement a new prequalification process for dentists attending our educational event that has been the primary lead generator for new VIP at the same time, we launched several new marketing campaigns, which are having some of the highest conversion rates we've ever seen.
I am pleased to announce that vivo since joined the Seattle study club, which is one of the most prestigious organizations for continuing education in the country.
With an audience of nearly 6000 of the nation's top dentists. We are already seeing strong results from these efforts in March we generated three times. The number of leads for new Vips that we had in just the prior month. We're very excited about these results and look forward to continuing this momentum throughout the year.
For all of the above reasons, we feel extremely optimistic about the future of our company, we see many opportunities to scale and extend we now have the people the context the model and the momentum to see this company start to realize its full economic potential with.
We deeply appreciate your confidence and continued support as we've laid the foundation for a bright and exciting future.
And now we'll take your questions.
Thank you.
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One moment, please while we poll for questions.
Our first question is from the line of Scott Henry with Roth Capital Partners.
Receipt.
Thank you Anne and good afternoon, Kirk you covered a lot of ground. There are just a couple questions you know first.
With regards to VIP I recognize that the revenue will be spread over a larger time period with chill eventually annualize in.
It'll be similar but that that VIP add number of 50 in fourth quarter. Do you think that's a representative number of what you would expect to add quarterly going forward or you know what what types of ads should we be thinking about on a quarterly basis, knowing there will be some volatility.
Yeah, I would say, we do have some seasonality in our in our enrollments and.
The fourth quarter tends to be a little better the first quarter tends to always be a little softer, but and that's been true here in the first quarter of the year, but you know this is they they don't they don't drop off dramatically Theres just some fluctuation that goes on throughout the year I think what youre going to find Scott.
Is because of the way we've restructured.
So doctors, we used to be a very binary organization. We had you either paid the full upfront initiation fee or enrollment fee, which was.
Somewhat of a barrier for some of these doctors and it was $45000 for these guys to get all the training that they need it now we've got multiple levels and multiple ways that these doctors can participate and that they can begin to generate revenue for themselves their practices right away. So we have multiple layer.
Ours are levels of entry points at various prices. So that there's really no reason for people to walk away from a and in an event with us or walk away from any type of an exposure to vivo sphere and not participate at some level. We have we are very inexpensive ways now for <unk>.
Doctors to do that if they want the the full.
A measure of what we have to offer that VIP program is still available, but I think what we're going to find is is that the numbers of VIP doctors is going to continue to rise we're having some great success with our dsos that that tends to add a lot of doctors.
More of a cost effective way.
And so I think what we're going to see is that number is going to accelerate as we go through 2023, because we will have other we'll have a lot of doctors that hesitated or delayed getting involved with vivo.
Because they they really didn't want to pay for all the training that's required now they can get limited limited access with limited training they can get it to get it put a toe in the water and that's that's actually we're seeing a lot of interest and a lot a lot of growth in that area. So I think the numbers are going to get better as we go throughout 2023, because we just.
Here mid quarter rolled out that new program and and it's been very well received so we're starting to see some some good positive signs there it's too early to tell exactly what the impact will be but we think with lower with multiple ways and multiple price point levels to participate I think that we're going to see that.
Number go up.
Okay, and then apply.
Appliances was kind of flat quarter to quarter sequentially third quarter to fourth quarter.
How do you find utilization per dentist, how should we think about that trend should we think about it flat or you know just with more dentist driving the number or do you think you'll get some more gains as far as the appliance per dentist.
So that's a great question and bear buried in our our monologue that we just gave you guys.
There was a statistic or.
In event that we reported on we overhauled our training and we rolled this training out.
And then measured the productivity of the attendees who this was initially rolled out last September we measured the three months prior we measured that three months after training and this new trading yielded a threefold increase in doctor productivity, we're very excited about that.
Now we're going to continue with those type trainings, we take those trainings on the road typically so that we can.
We can reach dentists on east coast, North South East and West. So we're we don't require dentist to come to Colorado for that we take that out on the road, but they're relaxed and more specifics.
Specific focus training that we've rolled out is yielding some some very important.
Important and very <unk>.
Significant increases in productivity, so I would say Dr productivity as we get more of our doctors through that process doctor productivity should should be up higher than what it was last year.
Okay and then the acquisition that recently took place how should we think about the magnitude of a revenue gains there isn't in the timeline of realizing those revenue gains.
Yeah.
Well, we are I'll just tell you. This we are extremely excited about this new technology that the the impact that it will have I think on our business will be profound.
And we think we see the introduction of a low cost easy to use easy to deliver.
Products such as the pod.
To be a central part of our appeal to Dsos to the <unk> companies.
Two other other groups that we that allow us to scale our business more rapidly.
When we go after.
Onesie, Twosies dentists, and we get one dental office at a time, it's hard to scale that in a meaningful way short in a short period of time.
When we have larger groups or we have companies such as <unk> companies with vast numbers of patients.
The simplicity of training a dentist to do a a pod device delivery for example, with a patient we can do that training in about two hours.
It takes us at least three days of live training and probably another 12 hours of online training to get our doctors ready to to deliver and produce with our care devices. So the the the simplicity and the immediate profitability of the <unk>.
Pas are very appealing to the dental market.
Got vast numbers of patients that can use them and use them well and so we're very excited about what that's going to mean and I think it's really honestly I think it's a bit of a game changer because of the way that it allows us to go.
More broadly in deeper into the market that we all know it's just they're just screaming for something if they fail CPAP. They have nowhere to turn except a surgical operation and that's really for most patients not not really on the table. So.
Okay, great. Thank you for taking the questions.
Thank you for asking.
Okay.
Yeah.
So operator.
Are there any further questions.
Oh, yes, we do have one.
Our next question is from the line of Lukas.
Capital markets. Please go ahead.
Hi, guys good afternoon, and congratulations on your progress.
Thank you.
Yeah.
So I wanted to ask about these institutional partnerships.
Got the Dsos in the D M <unk>.
And it sounds like.
There is just massive business there.
So I'm wondering like.
You know what are the bottlenecks like how long does it take to close these deals.
And you know once you do get.
Our major DSO or do you have me on board is it does it just opened the floodgates or.
Is this something that we can model.
Okay. That's Lukas that's a great question, let me, let me so I'll remind everyone.
That.
Back in 1995, I was one of the very first.
Individual entrepreneurs that started the DSO industry I watched that industry grow I'm familiar with the players in it.
And I I caution to everyone. When we when we launched our DSO initiatives because I know these guys, they're very they're very very cautious.
From an operational standpoint, introducing anything into anything like what dental sleep medicine.
Entails into a dental practice it requires a great deal of patients a great deal of commitment and a great deal of energy and in time by the DSO. So we never really expected the dsos to be any sort of an immediate sort of revenue panacea.
Having said that we're making huge strides there we have had some amazing success stories that are just really stunning in there in there and the way that they that their day.
Delivering services to patients within the Dsos.
And we're gaining a lot of traction in fact I have people right now at the largest annual DSO conference going on right now in Orlando.
But we are we really think that that's a little bit of a slow burn the opportunity there is huge.
But it's a little bit of a slow burn the dsos are just very cautious and very careful several of them have been burned by trying to implement sleep programs into their organizations in the past and they they've never had a company like vivo that is solved all the barriers to entry.
So the it's proceed with caution with those guys and it's going to take a little bit of time, but once they flipped the switch once they realized and they are starting to realize how big this opportunity exists. They they will come on strong I would I would say that we really won't see any.
Revenues from the Dsos until the latter part of this year and going into next for the D. N needs. It's almost the opposite the D. N E companies are thirsty from our experience so far they are craving and looking for somebody.
Excuse me somebody to come along and help them navigate.
The world of dental sleep medicine, they've tried they its been difficult and working with Ventas is not always easy. The fact that we have a nationwide network is a very very appealing thing. The fact that we have different price point opportunities from the pod to a mandibular advancement.
Two our care devices, which can take up to take their patients and take them from a low cost low entry quick fixed type thing to all the way to potentially resolving their OSA. The dnb companies are all over this I fully expect that <unk> companies to be a primary driver for our revenues as we go through.
Our 2023 and into 2024 and yes. The opportunity there is unlike anything we've ever seen and we think the dnb companies or a total game changer for for vivo. We're in we're deep into contract negotiations in pilot.
With.
The beginning pilots with several of these guys that were excited about what we're seeing there. We're excited about their enthusiasm for what we have and we see the <unk> as being much more immediate in terms of revenue drivers.
Okay, I just had a couple of financial questions, possibly for Brad or whoever well okay.
Okay.
Yeah.
Can you.
Say, what your revenues in the fourth quarter would have been without the revenue recognition change so instead of $4 million would it have been.
5 million or higher.
Yeah, it's very difficult to look at it like on a quarter over quarter basis, you know, we talked about two and a half million dollars.
Moving them from.
Recognition of revenue into deferred revenue and but that'll be recognized at some point in time. So it's not like that revenue goes away that revenue just gets deferred we used to recognize revenue over 12 months.
And now it's up to 18 months.
One of the longest piece. So so that's it's more of a deferral.
Program than it is anything else.
Okay clear.
Clear.
And then with respect to operating expenses I was wondering if you could give a little.
Color there it looks like the.
Sales and marketing was up sequentially quite a bit.
Although you were down a little on G&A.
I'm wondering sort of what the trend is likely to be for 2023.
On well just operating expenses overall, you did $35 million.
This year like do you expect that to grow in 2023.
And if so like roughly how much.
Well, we've been focusing on our cash burn and operating expenses and G&A are obviously, a big part of that we had.
180 employees in 2021 and now you know we ended the 2022, it's about a 160 and we are looking at other ways to save cost in terms of outsourcing some some personnel.
To save some costs there, but we're really focused on the cash burn and if you look at the cash burn in in first quarter, we the whole quarter or first quarter of 2022, we burned $6 $2 million of cash and in the fourth quarter, we burned $3 3 million of cash.
And in third quarter, we burned 6 million. So we were down just about half of our burn between third quarter and.
Fourth quarter, so we saved $2 $7 million. So we're looking at things.
On a basis of what do we need to scale.
We're driving top line revenue.
And looking at them.
At the expense line items. So we can start to improve the bottom line as well.
Okay clear thank.
Thank you very much.
Question.
Thank you.
Thank you.
There are no further questions at this time I would like to turn the floor back over to Colin Smith, Chairman and CEO for closing comments.
Thank you operator, I would like to thank everyone again for joining us on today's call and for your continued interest in vivo therapeutics and we look forward to sharing our continued progress with you in the future.
And have a great evening.
<unk>.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Yeah.
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