Q3 2024 Vivos Therapeutics Inc Earnings Call
Good day, everyone and welcome to the vivo Therapeutics third quarter 'twenty 'twenty four earnings conference call.
Speaker Change: Participants are in a listen only mode.
Speaker Change: A question and answer session will follow management's remarks on this conference call is being recorded and a replay of today's call will be available on the Investor Relations section of evils website and will remain posted there for the next 30 days.
I'll now hand, the call over to bed, and then chief financial officer for introductions and the reading of the Safe Harbor statement.
bed: Please go ahead.
Speaker Change: Thank you lovely Hello, everyone and welcome to our third quarter 'twenty 'twenty four conference call a copy of the earnings press release is available on the Investor Relations section of our website at Www dot be Bose Dot com forward Slash Investor Dash relations.
Speaker Change: On today's call are Curt Huntsman vivo as chairman and Chief Executive Officer, and me, Brad Allen Chief Financial Officer.
Speaker Change: Today, We will review the highlights and financial results for the third quarter 2024, as well as more recent developments and our Bemis plans for the rest of 2024. Following these formal remarks, we will be happy to take questions.
Speaker Change: 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 of the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act of 1934 as amended concerning for future events word.
Speaker Change: Such as aim may could should projects expects intends plans believes anticipates hopes.
Speaker Change: Estimates goal and variations of such words and similar expressions are intended to identify forward looking statements.
Speaker Change: 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.
Speaker Change: Actual results, including without limitation the results that would give us growth strategies operational plans, including sales marketing distribution product acquisition integration research and development regulatory initiatives cost saving plans and plans to generate revenue as well as future potential results of operation.
Our operating metrics such as the potential for vivo to achieve future positive cash flow or profitability.
Other matters to be addressed by VITAS management in this conference call may differ materially and adversely from those expressed or implied by such forward looking statements factor.
Speaker Change: Factors that could cause actual results to differ materially include but are not limited to the risk factors described in other disclosures contained in the Veeva <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.
Speaker Change: 31st 2023.
Speaker Change: Our other filings with the SEC, including our third quarter 10-Q filed with the SEC today, all of which are or will be accessible on the investor Relations section of the leave us website as well as the Sec's website.
Speaker Change: Given these risks uncertainties and contingencies, you should not place undue reliance on our forward looking statements finally, except to the extent required by law Devos assumes no obligation to update our forward looking statements as circumstances change finally, please be aware that the U S food and drug administration has give.
And certain specific devos appliances, five 10-K clearance to treat mild to severe OSA in adults with the F. D. A clearance for severe OSA last November and more recently, the pediatric F. D. A clearance for treating moderate to severe OSA in children ages six to 17.
Speaker Change: The treatment of patients with severe OSA with Veeva specific appliances is now no longer needed to be prefer to be performed off label at the clinic discretion of the treating doctor and is now an integral part of the Bow Street met protocol.
Speaker Change: Treatment of OSA of any severity or any other sleep breathing or other condition with any other aviva is quit FDA cleared devices remains at a clinical discretion of the treating doctor.
Now I will review the highlights of our financial results for the third quarter of 2024.
Speaker Change: For further information on our results for the three and nine month periods ended September 30th 'twenty 'twenty four please see our earnings release, which was distributed earlier today and our quarterly report on Form 10-Q, which is available on the SEC filings portion of the Investor Relations section of our website.
Speaker Change: Today, we reported third quarter 2024, total revenue of 348 $9 million compared to $3 3 million for the third quarter of 2023.
Speaker Change: This is a 17% increase quarter over quarter.
The quarter over quarter growth was due to an increase of approximately a half a million in product revenue from higher sales it'd be about appliances, and guides and lower discounts on veeva appliances, coupled with an increase of 100000 in service revenue, reflecting early recognition of deferred enrollment revenue and increase in spa.
Speaker Change: Monsour ship seminar and other service revenue, partially offset by a decrease in my functional therapy revenues.
Speaker Change: Billing intelligent service revenue VIP enrollment and home sleep testing service revenue remained relatively.
Speaker Change: The unchanged quarter over quarter, keeping in mind that VIP enrollment revenue will be significantly less important for veeva going forward given the June 2020 for a shift in our marketing and distribution model, which we will discuss in detail today.
Speaker Change: For the nine months ended September 30th 'twenty 'twenty, four total revenue was $11 $3 million compared to $10 6 million in the comparable peer.
Period in 2023, an increase of approximately 7%.
Speaker Change: During the third quarter of 2024, we enrolled five vips recognize VIP enrollment revenue of $900000 a revenue decrease of 6% compared to the third quarter of 2023, when we enrolled 29 vips for $1 million in revenue.
Speaker Change: The revenue decrease was impacted by our shift in sales and marketing strategy to focus on sleep provider affiliations offset by higher incidence of breakage in contracts.
Speaker Change: Approximately a half a million dollars in revenue was attributed to.
Speaker Change: The accelerated revenue recognition on several contracts for Vips, who did not complete their required training during the first 90 days of their enrollment please.
Speaker Change: Please refer to our 10-Q for further details on this particularly on our revenue recognition policy for enrollment revenue.
Speaker Change: For the nine months ended September 30 of 'twenty 'twenty four we enrolled 87, Vips and recognize VIP enrollment revenue $3 million of revenue decrease of 6% compared to the same period last year. When we enrolled 110 Vips for $3 2 million.
In addition to the lower number of enrollments revenue was impacted by updates to key inputs and our revenue recognition methodology, primarily estimated customer lives. The addition of new entry levels into the VIP program at lower price points and a new pay per class training program.
Speaker Change: As stated earlier as VIP enrollment will be much less of a focus for us going forward. These metrics and revenue recognition methodologies will become a less important for us in future periods.
Speaker Change: We sold 1954 oral appliance arches during the third quarter of 'twenty 'twenty four for a total of $2 million or 34% increase in revenue compared to 1809 oral appliance arches. During this third quarter of 2023 for a $1 5 million.
Speaker Change: The increase in revenue is directly attributable to an 83% decrease in discounts offered during the third quarter of 2024 compared to the same period last year.
Speaker Change: For nine months ended September 30th 'twenty 'twenty four we sold 5993 oral appliance arches for a total of $5.6 million, a 17% increase in revenue compared to the same period in 2023.
Speaker Change: When we sold 6261 oral appliance arches for $4 $8 million.
The increase is directly attributable to a 66% decrease in discounts offered during the nine months period in 2024 compared to comparable period in 2023.
Speaker Change: Yeah.
Speaker Change: As Kirk will discuss in more detail, we began to see patients from our strategic marketing and distribution Alliance model announced in June with three of his house and operate or several sleep testing and treatment centers here in Colorado.
Speaker Change: As a result, the fourth quarter of this year will be the first full quarter of operations under this new model, which is based on collaborations with sleep and breathing disorder treatment providers to better align our interest with referring medical professionals.
Speaker Change: We expect this will broaden the number of OSA patients, who have access to those products and make our revenue far less reliant on VIP enrollments.
Speaker Change: As Kirk will also explain we are excited by the shift in our sales and marketing model and we see opportunities to scale. This model through similar alliances or collaborations.
Speaker Change: Gross profit was $2 3 million for the third quarter of 2024, an increase of $600000 or <unk> 34 per cent compared to third quarter of 2023 they.
Speaker Change: The increase was primarily attributable to an increase in revenue.
Gross margin for the third quarter of 2024 was 60% compared to 53% for the third quarter of last year.
Speaker Change: For nine months ended September 30th 2024, gross profit was $6 $9 million, an increase of $700000 or 12%.
Speaker Change: Compared to the same period in 2023 attributable to the increase in revenue.
Speaker Change: Gross margin for the nine months period ended September 30th 'twenty 'twenty four increased two percentage points to 61% from 59% in the same period in 2023.
Speaker Change: Yeah.
Speaker Change: Sales and marketing expenses decreased by about 300000, or 46% to 300000 compared to the third quarter of 2023.
Speaker Change: The decrease was primarily driven by lower sales commissions as well as sales related and digital marketing expenses.
For the nine months ended September 30th 2024 sales and marketing expense decreased 29% to $1 $3 million compared to the same period in 2023.
Speaker Change: As we've said previously we are committed to increasing efficiencies and significantly lowering our burn rate as we seek to prudently use our capital resources and achieve our main goal of becoming cash flow positive from operations.
Speaker Change: Trend continued in the third quarter as we again achieved a significant reduction in general and administrative expenses.
Speaker Change: Importantly, the third quarter marks the ninth straight quarter in which we've been able to continue with this trend.
Speaker Change: For the third quarter of 2020 for general and administrative expenses decreased to $4 $5 million from $4 6 million in the third quarter of last year.
Speaker Change: For nine months ended September 30th 'twenty, 'twenty, four G&A expenses decreased $3 $5 million to 13, and a half million or approximately 20%.
Speaker Change: Compared to the 17 million for the nine months ended September 30th 2023.
Speaker Change: The decrease reflects lower professional fees and a reduction in personnel and related compensation.
Speaker Change: Total operating expenses for the third quarter of 2024 decreased $400000 compared to the third quarter of 2023 as noted this represents our ninth consecutive quarter, where we have reported year over year decreases in operating expenses and it is mainly due to cost continued cost cutting in.
Speaker Change: <unk> that we have taken on since the middle part of 'twenty to 'twenty three 2022 throughout 'twenty, 'twenty, three and as well as in 'twenty 'twenty four.
For the nine months ended September 30th 'twenty, 'twenty, four operating expenses decreased by $4 $1 million or 21% compared to the same period last year.
Speaker Change: Our cost cutting initiatives and lower G&A also contributed to a significant year over year reduction in operating loss, which decreased $1 million or 27% versus the third quarter of 2023 four.
Speaker Change: For the nine months ended September 30th 'twenty, 'twenty, four operating loss decreased $4 $8 million or <unk> 36 per cent compared to the same period in 2020 three.
Speaker Change: Net loss for the third quarter of 2024 increased by 25% to $2 6 million compared to the same quarter of 2023.
Speaker Change: Due to prime.
Speaker Change: Primarily a third quarter change in the fair value of them.
Speaker Change: Warrant liability.
Speaker Change: For the nine months ended September 30 of 'twenty 'twenty, four net loss decreased by $1 million or 11% to $8 $3 million compared to the same period in 2023.
Speaker Change: Now turning to our statement of cash flows cash burn from operations for the nine months ended September 30th 2024 was $9 $8 million compared to $9 2 million during the comparable period last year.
Speaker Change: This increase is due primarily to the $1.2 million decrease in accounts payable prepaid expenses and other assets.
Speaker Change: For the nine month period ended September 30th 'twenty 'twenty four net cash used in investing activities of $400000 consisted of capital expenses for our operating for our software related to the development of our ordering software, which is expected to be placed in service by the end of the year.
Speaker Change: This compares to net cash used in investing activities of $700000 in the comparable 'twenty to 'twenty three period.
Speaker Change: Arising from capital expenditures for the ordering software as well as an asset purchase of intellectual property in 2023.
Speaker Change: For nine months ended September 30th 2024, net cash provided from financing activities of $14 $8 million is related to our February warrant inducement transaction, our June strategic private equity backed pipe transaction.
Speaker Change: And our September registered direct offering this.
Speaker Change: This compares to net cash provided from financing activities in the comparable 2023 period of $7 $4 million, reflecting our January 2023 pipe.
Speaker Change: As previously announced to augment our liquidity position and stockholders equity in June 2024, we closed on a seven and a half million dollar equity growth investment from an affiliate of new Seneca partners, a leading middle market private equity firms.
Speaker Change: This investment along with our September 2020 for Reg registered direct shelf offering of $3 8 million net proceeds is more than sufficient for us to demonstrate compliance with nasdaq's minimum equity requirement as of the end of the quarter and materially both bolsters, our weibo's cash on hand.
To facilitate the rollout of new strategic Alliance based sales and marketing model, which is expected to positively impact <unk> revenue growth.
Speaker Change: Kirk will speak more on this shortly.
Speaker Change: As of September 30th 'twenty 'twenty four.
Speaker Change: We had approximately $6 $3 million in cash and cash equivalents compared to 1.6 million as of December 31, 2023, our stock stockholders equity at September 30th was about $7.7 million.
Speaker Change: In conclusion, we reported solid results for the third quarter.
Speaker Change: We continue to take actions to improve our cost structure and reduce cash burn while strengthening our cash position.
Speaker Change: We believe we have come a long way in strengthening our balance sheet and streamlining our operations to get costs under control now.
Speaker Change: Now the table is set to drive revenue and further improve our results of operations Kirk will further explain our plans to do this.
Speaker Change: I want to thank you all again for joining us on today's conference call now I'll turn the call over to Kirk Huntsman Chairman and CEO.
Speaker Change: Kurt Please go ahead.
Speaker Change: Yeah.
Speaker Change: Thanks, Brad.
Speaker Change: Afternoon, everyone and thank you for joining us on today's conference call.
In the third quarter of 2024, we continued to make significant progress towards our primary corporate objectives.
Speaker Change: Just to recap and highlight a few financial metrics.
Speaker Change: Quarter over quarter same period revenue was up 17% with product revenue up 34%.
Speaker Change: Quarter over quarter same period gross profit was up 34%.
Speaker Change: Gross margin increased to 60% from 53% in the third quarter of 2023.
Quarter over quarter same period operating expenses were down 8% and lower than the prior year quarter for the ninth consecutive quarter.
Speaker Change: Quarter over quarter same period operating loss was down 27%.
Speaker Change: Year over year nine months total revenue was up 7% with product revenue up 17%.
Speaker Change: Year over year nine months gross profit was up 12%.
Year over year nine months operating expenses were down 21%.
Speaker Change: Year over year nine months operating losses were down 36%.
Speaker Change: And cash on cash and cash equivalents on hand were up nearly four times over the levels of December 31 2023.
Speaker Change: So the trend lines of our financial performance are good and as Brad said, we believe the financial structure of our organization is significantly improved from our efforts and our results of operations should continue to improve if we can drive revenue, which we believe we can do with our new alliance based sales and distribution model.
Speaker Change: Yeah.
Moreover, our latest milestone FDA clearances to treat severe OSA patients in both adult and pediatric populations as well as our new insurance codes.
Awarded by the American Medical Association are proving to be a real asset and providing not only credibility as to the efficacy of our products versus our competition, but the broadening.
Speaker Change: Of our shots on goal to achieve the critical corporate initiative of increasing our revenues.
Speaker Change: To help in this effort, we have been aggressively taking steps to expand our marketing and outreach efforts by hiring new marketing firms and personnel with deep experience in brand management and bringing products to market.
Speaker Change: Active efforts are underway to let the world know of our amazing FDA cleared technology and its potential to positively impact the lives of millions in that regard we are creating multimedia content to be delivered directly to both health care professionals and also patients seeking solutions and alternative treatment options.
Speaker Change: Some of that new content is already being disseminated across multiple channels.
Ultimately our goal with these new marketing campaigns is twofold.
Speaker Change: First to make as many health care professionals as possible aware of our technology such that they will refer as many patients into our new strategic alliance locations as possible and second to have patients requesting vivo treatment by name from those providers.
Speaker Change: As we have previously indicated our new sales and distribution Alliance model is designed to deliver higher total revenue per clinical case, along with higher gross profit.
Speaker Change: We believe this strategic pivot towards affiliation or outright acquisition of medical based full service breathing and sleep centers represents a key inflection point for us that will materially alter our prospects for growth and profitability.
Speaker Change: During the third quarter, we launched the initial phase of our first strategic alliance with <unk> Health, a Colorado based multicenter sleep clinics.
Speaker Change: During the initial two to three month phase of the new model rollout. The emphasis has been on hiring and training new staff clinical training for the Denison empties and setting up all the systems and support technologies, such as practice management software patient financing lasers, CVC, <unk> scanners et cetera et cetera.
That all takes time and effort, but I'm pleased to announce that our team executed well there and we began seeing patient prospects in late August.
Our experienced thus far this new model has left us very optimistic about how this new model will perform in the future such.
Such that we have recently decided to expand the operation into two additional Denver area locations, which should begin to come online in December or early 2025.
Speaker Change: Keep in mind that for every 100 OSA patients per month that start vivo treatment of some kind under this new model, we expect to realize top line revenues of nearly $8 million annually.
Speaker Change: Thus, we anticipate topline revenues to continue building as early as the fourth quarter of this year and into 2025.
Speaker Change: Well it takes time and experimentation to.
Speaker Change: Pivot any business model.
Speaker Change: There are several noteworthy key performance indicators that are emerging from our operations with our new model thus far.
Speaker Change: These include the following.
Speaker Change: First our first strategic alliance partner has nearly 100000 OSA patients in their database and receives approximately 1200, new patient referrals per month.
Speaker Change: Next we are seen a remarkable 9% response rate to our partners' internal patient email marketing campaign.
Of those who respond and come in for visits.
About 86% desire further evaluation.
And thus far just over half of those patients are moving forward with treatment.
Speaker Change: Now, we do expect that figure to continue to increase as more patients work through their personal insurance and financing options.
Speaker Change: We just believe we are barely scratching the surface of what is possible as we continue to roll forward.
Speaker Change: There are reportedly over 2500 E. A S M accredited sleep labs and testing centers across the United States with well over 100000, new OSA patients being diagnosed each month.
Speaker Change: Sleep clinics typically operate on a high volume low margin business model.
Speaker Change: And are very intrigued by the higher margin products and services vivo can bring to the table.
Speaker Change: We are currently in active discussions to affiliate with.
Speaker Change: [noise] or acquire a number of additional sleep testing groups around the country and we expect to continue to refine the model as it rolls out based on our experiences.
On September 20th of 'twenty 'twenty four we closed on an equity offering providing net proceeds proceeds of $3 7 million to vivo.
To purchase one 1 million 363812 shares of common stock at a purchase price of $3 15 per share.
Speaker Change: There were no common stock purchase warrants issued to investors in the offering.
Speaker Change: With this increased liquidity, we have moved ahead with the launch of our new strategic Alliance model and potentially other similar alliances, which we expect to positively impact Veeva is revenue growth.
Speaker Change: During the quarter and more recently, we also achieved important milestones to strengthen the foundation for future growth, notably a key FDA clearance for the use of our devices in children and the issuance of new insurance coats covering our medical devices.
Speaker Change: Both of which create the potential for wider adoption of vivo devices and increasing revenue.
Speaker Change: In closing we boast is closing out 2024 on several very positive notes and is emerging with an existing and exciting new business model that has the potential to provide our FDA cleared and proven technology to thousands and perhaps tens of thousands of people who may never have seen or heard.
Speaker Change: To vivo.
Speaker Change: So thank you for your time today and behalf and on behalf of all of US here at <unk> I would like to express my gratitude to our shareholders for your continuing support throughout this journey.
That concludes our prepared remarks, now we'll be happy to take questions operator.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, now begin the question and answer session should you have a question. Please press the star followed maybe number one on your Touchtone phone you will hear that right.
Speaker Change: Should you wish to decline from the polling process. Please press the star followed by the number is.
Speaker Change: Speakers, please listen to handset before pressing any key one moment. Please for your first question.
Your first question comes from the line of do Kim from water Cowen Research. Your line is now open. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Hi, guys. Thanks for taking my questions.
Speaker Change: Kirk I just wanted to see.
Speaker Change: See if you could tell us a little bit more about what you've been seeing with the new marketing model at.
Speaker Change: The clinic that you're in right now and what does that exactly that's giving you confidence to expand that into additional locations.
Speaker Change: The response to the internal marketing campaign.
Speaker Change: Any any direct patient interaction experience that you could talk about.
Speaker Change: Yeah. That's a great question. Thank you for that.
So I think.
Speaker Change: Our last quarterly update I sort of walked everybody through.
Speaker Change: The lengthy process that we went through two.
Speaker Change: We evaluate and.
Speaker Change: And poke put together this new model. This this wasn't something that we just stumbled upon this was something that we.
Speaker Change: We did some pilot work out in the field, we did a lot of extensive testing and we were very confident going in that what we had experienced in the throughout throughout our efforts of the pilot that we would continue to experience. Once we actually went live in in an actual live.
Speaker Change: Scenario.
And so while we were very confident you know it's it's still.
Speaker Change: It's still a little bit different to get actually in there and start producing and so as we turned on the spigot and got going we began to see conversion rates patient acceptance patient interest.
Speaker Change: Provider excitement and enthusiasm at all at very very high levels, just as we had hoped for and as we had forecast. So the challenge to date has just simply been the normal challenges that you would expect as you're as you're beginning any kind of you know new new business, there's there's things to be worked through.
Speaker Change: Through there's just new.
Speaker Change: Personnel on on the team there, they're coming up to speed on new new systems and jobs and all that type of thing. There's just that type of thing that we've encountered.
Speaker Change: We are starting to open the spigot further there's a we have a I don't want to say, it's an unlimited number of at bats that we can have here, but but we haven't even begun to really tap the.
Speaker Change: For potential of the the patients that reside in the database.
Speaker Change: Or is it in the new patient flow and we and to some degree that's been by design, but now I think we have satisfied ourselves.
Speaker Change: The folks at <unk> health that that.
Is that everything is is smoothed out working according to plan and it's time to sort of put them put the pedal to the metal. If you will so in even this next week as we as we sort of roll into the second half of November here.
Speaker Change: Additional campaigns are going out via email and otherwise.
Speaker Change: And certain other other avenues are being.
Speaker Change: Looped in here, so that the top of the funnel becomes more full and I think as that happens we will be able to open up more days of production.
Speaker Change: Throughout this time August late August September and October.
Speaker Change: We've really only had about two days of production per week. So it hasn't we haven't been far from from having the thing go full tilt, while we work through some of the training of our team and all of that sort of thing.
Speaker Change: We're very satisfied with what with what our what the way our team has come around and come together, we've got the doctors hired for our additional locations.
Speaker Change: Here in Colorado, and the teams are being you know in their final training phases here some of them have already been through some of the training or are most of the training doctors are ready staff is prepared so I think by.
Speaker Change: December for sure and possibly even a little before then we'll be turning on the spigot.
Speaker Change: Pretty heavily at a couple of these new locations and ill just add to what we're doing up there in a lot of money.
Speaker Change: Got it.
Speaker Change: Very helpful.
Speaker Change: How do you roll in the <unk>.
Speaker Change: <unk> asset population.
Speaker Change: Recent.
Speaker Change: Recent FDA clearance.
Speaker Change: Or moderate severe OSA is that.
Speaker Change: Seamless addition to the marketing campaign or get go through additional efforts to capture that population.
Speaker Change: Well.
The answer is it's a little bit of both one of the one of the things that we have experience. So we we had sort of alluded to this and we expected this but we werent sure. We didn't we didn't budget for it but but one of the things we've always seen in the past is that when when the parents come in and see their their results of <unk>.
Speaker Change: Our technology invariably they will they will point to their kids and go you know I've got a child I've got a team I've got a young adult that has exactly the same problem. What do you have for them and so to some degree we have already been treating entire families where we.
Speaker Change: We may have for example, one patient in the database and when they come in for treatment and then we educate them and spend a little time with them and then we as we put them into treatment and explain whats going on they'll be right back there within a week or or a month or whatever with a child or in some cases the NT.
Our group of kids right in there. So that's one way. So so there's a there's sort of a cross pollination within families that come in through this treatment.
And then and then I think the other thing is that schools.
Speaker Change: And school districts and and other medical professionals that treat kids.
Speaker Change: I see all the symptoms not all of the of the medical professionals are educated to look at where consider sleep apnea. So they'll see a child that has an aggressive behavior in school, perhaps there's attention deficit, there's other things and.
And so what they're what what we're doing is educating the professionals to basically say to them have you considered.
Speaker Change: A sleep and breathing problem for this trial, because it's easy to test and it's easier to validate and the solution might just be to correct that child's breathing and sleep and and so when we got research that shows that when we do correct the sleep and breathing problems that the.
Speaker Change: Behavior improves in the academic performance improves and and all kinds of of along a spectrum all kinds of things improve in that child's life and children begin to thrive so as the word spreads.
Speaker Change: And a lot of these parent groups, they're all you know, especially a lot of these mom groups in chat rooms and stuff, they're all very well connected we have a distributor that focuses on on you. They use nothing but vivo suppliance is and they focused solely on pediatrics they've had some.
Speaker Change: Some internet posts I guess, it's actually Instagram tictoc videos and alike that have gotten as many individual posts that have gotten as many as 35 and 37 million views.
Speaker Change: So we're talking about things that have they resonate the opportunity to address some of these childhood health issues resonates with parents parents, who want to know more information there, they're thirsty for information and they're even more Thursday for solutions to their kids problems. So some of this is just a little bit about <unk>.
Speaker Change: <unk> net out there and getting that message out which is why we've hired some absolutely.
Speaker Change: Absolutely stellar top drawer, social media digital media marketing types are we've got a book that.
It's been written underway, we've got a full on documentary that we're in the process of producing I mean, there's a there's some things that are really very strategic.
Speaker Change: Strategically being done right now behind the scenes to foment the interest level and all of that.
Speaker Change: Does that help yes, yes, absolutely.
Speaker Change: Makes sense and it seems like family like you mentioned firstly.
Speaker Change: Pretty large component.
Speaker Change: We know genetics is a factor.
Speaker Change: It is.
And last question, maybe this is for Brad.
Brad Allen: You could talk about the path to reach positive cash flow from operations by mid next year.
Brad Allen: How much are you thinking will come from revenue growth versus additional cost cutting.
Speaker Change: Well you know on the cost cutting side you know, we've we really did cut back to the bone.
Speaker Change: Now, we're starting to increase our cost structure for supporting the.
Speaker Change: Strategic Alliance.
Speaker Change: So that we can.
Speaker Change: Lately address the OSA of the patients that will be coming our way the the new model that that where you are doing is for.
We're selling to directly to the patient it comes with higher revenue than selling to a doctor you know your.
Speaker Change: So that really helps us in terms of reducing the number of patients that are required.
Speaker Change: To get to cash flow positive. So it's really going to be more on the revenue side, then costs getting side going forward.
Speaker Change: Yes.
Speaker Change: Great.
Speaker Change: I just want to add to that.
Speaker Change: Let me add to that really quick here.
Speaker Change: Remember that I referenced a stat that we came up with that I think we ought to keep our eyes on and that is for every 100, new patients per month. It represents accretive revenue of about $8 million per year.
Speaker Change: 100 patients a month guys is for some of these testing centers that are doing you know 1000, and <unk> hundred and whatever a month, it's really not a big leap to go from where we are now to where we can be and so so with with just a <unk>.
Speaker Change: 400, I think we did it.
Speaker Change: Our calculation of one time, a couple of hundred maybe $2 50, I can't remember the exact number of these new patients in the new model per month, I mean, we're effectively at cash flow breakeven. So we're not that far away. So so to contemplate.
Speaker Change: Getting there by the middle of next year. The end of the first quarter whenever that happens is not that hard to imagine at this point.
Speaker Change: Okay.
Yep.
Speaker Change: Looking forward to seeing your progress and congrats on the quarter.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Thank you dough.
Your next question comes from the line of Scott Henry from Alliance Global Partners. Your line is now open. Please go ahead.
Scott Henry: Thank you good afternoon.
Speaker Change: I guess, Brad or Kirk.
Hi.
Speaker Change: How should we think about fourth quarter sequentially from third quarter, we're halfway through right now it sounds like the new models getting traction, but it's unclear how much will be impacted in that quarter.
Speaker Change: What can you tell us how we should think about it sequentially.
I would think about it Scott that's a good question by the way I would think about it as a transition quarter for US I think this is gonna be a blended.
Brad Allen: As Brad.
Brad Allen: Referenced in his remarks, we have taken.
Brad Allen: Taken resources and sales resources, and promotional resources and outreach and Onboarding resources away from our dental channel and we have refocused and either eliminated those costs or refocus them, so well, while we have lowered cost rather dramatic.
Brad Allen: We've also lowered some of the revenue potential that that was embedded in there.
We will begin to see replacement of that revenue as we move through the latter part of the fourth quarter and into 2020.
Brad Allen: Five or.
Brad Allen: So there is I would consider this quarter to be a transition quarter for the company.
Brad Allen: As we're as we're now sort of replacing one source of revenue with another source of revenue, but as that as as that builds under the new strategic model where with it.
Brad Allen: A blue Ocean type opportunity, then I really believe that we're going to overcome whatever we were losing wherever we left on the table by not enrolling as many dentists will overcome that and more by actually putting our devices and patients mouse and getting more.
Brad Allen: Medical penetration.
Speaker Change: Okay. Thank you for that color and then Brad in the third quarter. There was still this big bolus from VIP revenue that came in.
Since you know the number was flat despite dramatically fewer vips.
Speaker Change: Is that sort of an accounting catch up and when we get into the fourth quarter should we expect the revenue to reflect the number of vips coming in I mean, basically that that line should fade to I imagine close to zero over time.
Shall we start to see that in Q4.
Speaker Change: Yeah, you'll see that over the next 12 months.
Speaker Change: We have on our balance sheet, a contract liability, which is really deferred revenue of $1 5 million.
$1.3 million of that is current and 200000 of it is long term so youll see that.
Speaker Change: Start too.
Speaker Change: We are recognized over the next four.
Speaker Change: Four to five quarters, you'll remember as we recognize revenue on the enrollments.
Speaker Change: Over the customer life, which in 'twenty 'twenty four is 27 months in 2023. It was 23 months so it's a little over.
Speaker Change: Two years that we recognize that revenue so that's how that will roll out over 2025.
Speaker Change: Okay. Thank you that's helpful.
Speaker Change: And then Scott Scott, Yes, a little more color on that.
Speaker Change: One of the one of the offsets to that so we're not enrolling Vips, where we you know these guys would pay you know $40 $50000 to go through a VIP process, but we are we have lowered the threshold and we've divvied it up.
Speaker Change: So that there are lower price points of entry for dentists, who still desire to join vivo and become a provider. They can just now do it in sort of incremental stages and the revenue recognition around that because it's just of course only is very.
Speaker Change: From the VIP program that we used to offer and so some of the loss of revenue from Vips and the as you mentioned the sort of the accounting revenue recognition reserve. If you will that we have built up.
Speaker Change: As that gets as that gets sort of worked through we do expect to see that we still have dennis that reach out to us all the time from all around the world, saying, Hey, I'd like to I'd like to get started.
Speaker Change: Can I can I can I get started with the kids program, we have our guided growth and development program. We have what we call a lifeline program, we have our care devices. So we have different entry points now something we've never offered before but as we've pivoted now away from a focus on dentistry, we've lowered the entry points.
Speaker Change: Divvied, it all up into bite sized chunks and I think some of what we might be losing today in this transition time might just be.
Augmented by by doctors, who maybe they've never joined Veeva before because of.
Speaker Change: The price point barrier, which we put out there intentionally.
But now now they might come in and say you know I only wanted to do kids well, that's that's like $8000. It's not $50000. So it's very doable for these guys and and I think we might start to see and we don't know yet, but I think we might start to see some offset on that so just as you think about the model going forward I don't think the.
Brad Allen: I don't think we're anticipating the dental training and enrollment model to go to zero it might go down quite a bit and it'll be recognized a little differently over time, but we don't expect it to go to zero I think that's a safe bet. Brad are you yeah, I mean, I think there's two different things one is the.
Speaker Change: I think your question was about and.
Brad Allen: Enrolled in enrollments in the VIP enrollment.
Brad Allen: The model that we that we have as an incumbent type of a legacy program versus the training that.
Brad Allen: Doctors that Werent, a additional training went now which is recognized over the performance of the of the training, whereas the enrollment was had a lot of performance obligations that were recognized separate from the REIT to REIT to buy if you will.
Brad Allen: Okay.
Brad Allen: There's two different two different components there now.
Brad Allen: Okay.
Brad Allen: Final question.
Brad Allen: The new model.
Speaker Change: You know obviously, Colorado is its close proximity to you, but certainly no monopoly on sleep apnea when.
Speaker Change: When would you expect to start.
Speaker Change: During out geographically to some other.
Speaker Change: High volume areas.
Speaker Change: We're already involved in that right now telemedicine is basically take it over sleep medicine and so.
Speaker Change: The opportunity to leverage.
Speaker Change: National networks, where you have licensed providers medical doctors.
Speaker Change: Across.
Speaker Change: All 50 states or wide wide swaths of the of the country.
Speaker Change: Give us opportunities to do that and without going into the detail I can tell you. We're already very actively engaged in laying the groundwork for that type of a rollout very very soon so just I have to say for now just stay tuned on that but.
Speaker Change: You know, we're we're we're very excited about what what.
Speaker Change: What is happening today throughout sleep medicine, because of telemedicine opportunities and because of the totally unique value proposition that our technology offers so it's a it's a great time to be vivo. So there is a great time to have this opportunity to be here. So.
Speaker Change: Okay, well, thank you for taking the questions.
Scott Henry: You bet. Thank you Scott.
Speaker Change: Your next question comes from the line of Lukas.
Speaker Change: Well I can tell me if I'm doing capital markets. Your line is now open. Please go ahead.
Speaker Change: Thank you hi, guys congratulations on your progress.
Speaker Change: Thank you thank you Lucas.
Speaker Change: So okay.
Speaker Change: I had a couple of questions on the sleep centers just to clarify how many are you active in now as it too.
Speaker Change: Okay.
Speaker Change: So we are actually at one location in Colorado with two additional locations that will be opening up here.
Speaker Change: Over the next few weeks as.
As we as we round out the year.
Speaker Change: Okay. So two additional and you had talked last quarter about like a horizon of six or eight.
Speaker Change: That you were targeting is over.
Speaker Change: Over what timeframe would that be.
Speaker Change: So we have we are in active conversations with a number of other <unk>.
Speaker Change: Sleep groups that do the testing the diagnostics. So the way. This typically works in sleep is a patient will.
Speaker Change: Either through their primary care physician, maybe it's through their dentist, maybe it's through a chiropractor whomever they will get referred to a sleep center or a sleep testing group, which might do home sleep test they'll get referred in and they'll get a sleep test and the sleep tests will be conducted by the testing group.
Speaker Change: Under the auspices of a typically a board certified sleep specialists, who will do the interpretation.
Speaker Change: And make a.
Speaker Change: Script, possibly a letter of medical necessity, whatever is necessary to get that patient.
Figured out once they have the diagnosis.
The basic issue at that that faces. The patient is you know what do I do now and Thats, where we want the exposure to vivo to occur at that point in the patient journey.
Speaker Change: Where the patient back down with the their medical Doctor.
Or their dentist or whomever and says okay. What what are my treatment options and the way we work at the sleep centers as we have our treatment navigators intervene at that juncture.
With the full knowledge and consent of the physicians and basically say.
Speaker Change: You know here's here's what you have here is what it means this is what this can do to you. If you don't treat it and hear your treatment options and then we go through their treatment options. We go through how they can manage this disease with obstruct with CPAP, how they can manage it with a an oral appliance device that does mandibular advancement.
Speaker Change: Or how they might rehabilitate their their their airway by use of Aviva treatment using one of our carrier devices and then and then we let the patients decide and and what we're excited about is that most patients are selecting.
Speaker Change: The rehabilitation around with vivo <unk> some of them are selecting to use another oral appliance, which we also supply them by the way. We don't just do the rehabilitation part with any any type of world clients device or in fact through the sleep centers any type of CPAP, we can handle all of that so.
Speaker Change: So we basically are giving the patients the full spectrum of opportunity too to make a choice and then to go into treatment and that's that's.
Speaker Change: That's kind of where were at and Ive.
Speaker Change: Totally lost sight of what your question was I hope I was responsive to it.
Speaker Change: Oh, you're you're you're on track Kirk because this gets into my next question, which is the business model for the new marketing strategy did you say that typically.
Speaker Change: Typically the patient would buy.
Speaker Change: We just did it.
Speaker Change: To outright and therefore, you get a higher ASP for that or maybe a payer would buy it like as opposed to the the VIP model, where they would have to go through the dentist and Dennis will take Ted can you just clarify like how how the.
Speaker Change: How the sales part of it works.
Speaker Change: Yeah, so basically the.
Speaker Change: In our model the sleep physician is working closely with the dentist both of them work under under agreements with us.
As sort of the management company of an MSL.
Speaker Change: So the.
Speaker Change: The management services organization.
Speaker Change: Operates the clinic and the providers, including the dentist and the physician are both employees of the of the.
Speaker Change: The clinic itself and so so what happens is the patients as far as the patient knows there they're working within.
Speaker Change: A medical practice led by a medical Doctor, who happens to work with a dentist that's part of their team that actually does what they do and so in that context.
Speaker Change: Well what happens is is that the that the the dentist is working they're not worried about overhead and a private practice or not worried about running our staff doing hygiene checks doing crowds and Phil is there anything there focused solely on sleep because of the efficiencies in that model, there's a lot more profit margin.
Speaker Change: Bailable four.
Speaker Change: Distribution and profits that are available for the Msos that eventually come back to vivo. So we supply the appliances to the to the dentists, who work at the <unk> and we supply them.
Speaker Change: With whatever support services that they need et cetera et cetera. So so in effect there, they're actually getting a <unk>.
Speaker Change: So it's a win win for their patience and everybody along the way.
Speaker Change: Does that makes sense okay.
Speaker Change: Yeah. So it's actually similar to the Veep thing, where you're essentially selling to the clinic or that provider and then theyre sort of.
They are <unk> to the patient.
Yes, that's correct that's correct okay.
Speaker Change: Alright, just switching gears.
Speaker Change: What.
Speaker Change: You did you say that you expect revenues to go up in the fourth quarter could you give.
Speaker Change: More could you expand on your outlook for for revenues.
Going forward.
Speaker Change: You know look I think because this is a transition quarter.
Speaker Change: I'm not sure how all the.
Speaker Change: So all the <unk>.
Speaker Change: Enrollment revenues that Brad and Scott, we're talking about I'm not sure how that all that is going to play out and I'm not sure how quickly the ramp is going to go in these new these two new new facilities.
Speaker Change: <unk> facilities, so I would say.
Speaker Change: We're hopeful that it'll go up it's just such a theres. So many changes taking place it's hard for us to forecast or predict in Q4, I think we're very confident that we will see.
Speaker Change: Some some accretion some the beginnings at least have some accretion in Q4 and some serious.
Speaker Change: Accretion more more development of the model in Q1 of next year and then going forward. So you.
Speaker Change: I would say.
Speaker Change: To look at this as either flat or maybe slight growth in this particular quarter of Q4, and then going forward into next year is where we think that will start to see this thing really take off and then the the level of growth next year should be significant in our view and our view.
Speaker Change: Okay, great. Thanks, Kirk I know those are tough questions to answer.
Speaker Change: I guess last question.
<unk>.
Speaker Change: About some of your other marketing channels that you've talked about the D. M. D. M is the dsos the international how do they fit in with the new focus on the.
Speaker Change: Alliances with the physician alliances in the sleep centers.
Speaker Change: We were very disappointed in what happened with our <unk> initiative and.
Speaker Change: You know its just the the DMA company just seemed like they just didn't they just lost interest after a while they had a changeover in senior leadership as CEO left right off shortly after our initiative launched the new the new CEO came in and just didn't have the same appetite for everything and so we.
Speaker Change: We were very very disappointed in that the DSO initiatives.
I think they they sort of reinforced.
Speaker Change: The the core conclusion that we came to hear about a year ago, which is.
Speaker Change: Man. These dentists are they they are there are some dentists out there they get this and do so extraordinarily well, but the vast majority of them are just not going to do it and they're not going to get it and it's just it's only because they just get so focused in on on their core dentistry.
Speaker Change: It's just hard for most of them to pivot the ones that do do exceptionally well both I mean for by every measure by quality of life by income level by you know satisfaction by I mean are you. Just go a survey. These guys that are just stark raving fans. The problem is is that there aren't any.
Speaker Change: Are those guys out there to scale our business to the degree that this market warrants or needs, if you're solely going down as dental path. So I think the dsos are no exception, we have a few dsos that do really well and are excited about what we're doing but even they within their own organizations run into this roadblock of.
Speaker Change: You know I've got a couple of guys here that really are excited about doing sleep.
Speaker Change: You know treatments with vivo <unk>, but the vast majority of our dentists are just so so about it I mean, it's just it's the same thing all over again, so I would say to your question how.
Speaker Change: How much do we count on or how much should we expect from those two channels I would say very little I. There's a couple of large dsos that have that are having.
Some incredible success on their pilots with us and I mean financial success and a lot of noise, but we still can't get the dsos to adopt this on a global basis. So you don't look at this juncture in time, we are deemphasizing the dental community not not.
Speaker Change: It not alienating ourselves from it.
Speaker Change: And but we are not where are our go forward path is clearly through what we're talking about in our new affiliation and strategic Alliance model using our NSO model. So that is that's that's where we see the future.
Speaker Change: That makes so much sense that you would be focusing on the people that are specialists in sleep.
Speaker Change: As opposed to dentistry, where that you know at apnea is kind of tangential.
Speaker Change: Yep Yep.
Speaker Change: Okay.
We agree with you we agree with you we wish we'd gotten to this conclusion.
Conclusion earlier, but here we are so.
Speaker Change: Okay.
Speaker Change: I could just get one more in the CPT codes.
Speaker Change: Yeah.
Speaker Change: That seems like a really great thing like.
Speaker Change: Can you quantify the incremental revenue impact of having those codes.
Speaker Change: Okay.
Speaker Change: Well, okay, not yet and the reason is is because while we have the codes and while they are unique to be those products. The category that is covered and defined in the <unk>.
Speaker Change: CPT documentation theres only the only products that fit that category or vivo products. What is not clear yet is how much the payers are going to pay under those codes and so our next effort is in 2025 and it's already started is to <unk>.
Speaker Change: Get in front of the payers and and and basically make our pitch for them to.
Reimburse at high levels for these code these new codes and so once we have that then I can answer your question with a greater degree of of <unk>.
Speaker Change: Specificity, but right now I would just say.
Speaker Change: The cycle is not yet complete as soon as we completed we start to get some some indications you know what we really need is one or two of the big boys to to sort of fall in line and many others will follow but we're still working on that we've retained some pretty a pretty powerful people who have the influence there with.
Speaker Change: Payers to help us with that so we feel like we are.
Speaker Change: <unk> bin.
Speaker Change: We're in good hands as far as that goes and just to add onto that there's a huge value proposition for payers to reimburse vivo for this because we are looking at you know where.
Speaker Change: We reduced the cost of care and in the health care system.
Speaker Change: By.
Speaker Change: We're the only product out there that actually can.
Speaker Change: Remediate this OSA.
Speaker Change: By use of our products. So it's that's a huge value proposition because theres a lot as we all know there's a lot of ancillary.
Speaker Change: Issues that arise from not getting enough oxygen during the night and so that's that's a huge reimbursement value proposition for <unk>.
Speaker Change: Okay Fantastic Thanks, guys I appreciate it.
Speaker Change: Thank you appreciate it thanks Lucas.
Speaker Change: Okay.
Speaker Change: There are no further questions at this time please continue Mr. Kurt.
Speaker Change: Thank you operator.
Speaker Change: I would like to just thank everyone for joining us on today's call and for your continued interest in vivo Therapeutics. These are obviously very exciting times and we look forward to sharing our continued progress with you as we move and continue to execute on our plans during the remainder of 'twenty for 2024 and into next year.
Speaker Change: So thank you very much have a great evening and a great holiday season and are.
Speaker Change: Looking forward to 2025, thank you so much.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
[noise].
Speaker Change: Yeah.
Okay.