Q1 2025 Vivos Therapeutics Inc Earnings Call
Good day, everyone and welcome to the vivo Therapeutics first quarter 2025 earnings call.
At this time.
Participants are in a listen only mode.
A question and answer session will follow management's remarks.
This conference call is made of core debt and deeply for today's call will be available on the Investor Relations section of the boat's website.
And really the main posted there for the next 30 days.
Speaker Change: I will now hand, the call over to Brad Damman, Chief Financial Officer for introductions and the reading of the Safe Harbor statement. Please go ahead.
Brad Damman: Thank you John Hello, everyone and welcome to our conference call.
Brad Damman: A copy of our earnings press release is available on the Investor Relations section of our website at Www Dot vivo dot com.
Curt Kannenberg: With us on today's call are Curt can spin vivo, <unk>, chairman and Chief Executive Officer and.
Steve Us: And myself, Steve Us Chief Financial Officer.
Steve Us: Today, we'll review the highlights and financial results for the first quarter 2025, as well as more recent developments and plans for the rest of 2025, including developments in our marketing and distribution strategy pivot.
Steve Us: Following these formal remarks, we will take questions.
Steve Us: I would also like to remind everyone that today's call will contain certain forward looking statements from our management made with within the meaning of section 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities and Exchange Act of 1934 as amended concerning future events word.
Steve Us: Such as aim may could should seek projects expects intends plans believes anticipates hopes estimates.
Steve Us: Go and variations of such words and similar expressions are intended to identify forward looking statements.
Steve Us: These statements involve significant known and unknown risks and are based upon.
Steve Us: 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.
Steve Us: Actual results, including without limitation.
Steve Us: The results of <unk> pending acquisition of the sleep center in Nevada, and other growth strategies operational plans, including sales marketing acquisition.
Steve Us: And integration research and development regulatory initiatives cost savings plans and plans to generate revenue as well as future potential results of operations, our operating metrics such as the potential for veeva to achieve future positive cash flows and profitability.
Steve Us: Other matters about the future to be addressed by leave US management in this conference call may differ materially and adversely from those expressed or implied by such forward looking statements.
Steve Us: Factors that could cause actual results to differ materially include but are not limited to the risk factors described in other disclosures contained in reverses filings with the Securities Exchange Commission, including the risk factors and other disclosures in our Form 10-K for the year ended December 31.
Steve Us: 2024, and our other filings with the SEC, including our first quarter 10-Q filed with the SEC today, all of which are or will be accessible on the investor Relations section of the Beavis website as well as the Sec's website.
Steve Us: Except to the extent required by law vivo assumes no obligation to update statements as circumstances change.
Steve Us: Finally be aware that the U S food and drug administration has given certain vivo suppliance has five 10-K clearance to treat mild to severe OSA in adults with the F. D. A clearance for severe last November treatment of.
Steve Us: Patients with severe OSA is no longer needed to be performed off label after clinical discretion of the treating doctor and is now an integral part of the Veeva treatment protocol.
Steve Us: That said I'll leave us appliances should only be used within their FDA cleared uses.
Kurt Huntsman: Now at this time, it's my pleasure to introduce Kurt Huntsman, Chairman and C. E O would be best Kirk. Please go ahead.
Kurt Huntsman: Thank you Brad.
Kurt Huntsman: And thank you all for joining us on today's conference call.
Speaker Change: In a moment I'll turn the call back to Brad who will walk us through the highlights of our first quarter of 2025 financial and operating results.
Speaker Change: After that we will be happy to take your questions.
Speaker Change: But before I do that I'll offer some brief remarks on our progress throughout the first quarter and provide an update on our important ongoing business model pivot and why we believe this is critical for our company's growth prospects and financial success.
Speaker Change: This year and over the long term.
Keep in mind that what we are seeing in the first quarter and what we expect to see continue in the second quarter.
Speaker Change: Is the inflection point in our business as we strategically transition over to our new model of creating strategic alliances with or outright acquisitions of sleep medical providers as a means of both driving sales of our cutting edge OSA treatment appliances and diversify.
Speaker Change: Our revenue stream with diagnostic and Consultative services.
Speaker Change: This pivot is less than a year old, but we are very excited about its prospects in the position. We believe it puts me goes in for a new era of growth.
Speaker Change: As expected our service revenues in the first quarter have declined as we eliminated our VIP enrolment sales team.
Speaker Change: And the active recruitment of VIP dentists.
Speaker Change: Also as expected product sales have been growing nicely, especially in our pediatric guide appliance line.
Speaker Change: Total arches ships grew.
Speaker Change: Grew 87% in the quarter from 1996 in the same period last year to 3736 this year.
Speaker Change: Product revenue for the quarter was up 8% due to the lower price points on certain pediatric products, but the overall sales volume trend is very positive as more patients than ever before are receiving devos treatment.
Speaker Change: Currently we are expecting to close on our previously announced acquisition of sleep Center of Nevada.
Speaker Change: Or S C N in the next month or two.
Speaker Change: When you closed this acquisition is expected to be accretive to our revenue and gross profit in the near term as S. C. N sees approximately 3000 asleep patients a month.
Speaker Change: Also as disclosed in our 10-Q today, we have signed a non binding term sheet for a seven and a half million dollars senior loan, which we expect to use to close the S. C N transaction and for working capital and.
Speaker Change: And things appear to be on track with that.
Speaker Change: The lenders require in a simultaneous equity infusion of at least $1 5 million.
Speaker Change: And as we are in active discussions and as and we are also in active discussions to bring in at least that amount as part of the S. E N closing.
Speaker Change: We are very confident that we'll be able to close this transaction. So in addition to our so in addition, our operations team has been on the ground in Las Vegas, working overtime to ensure that once the transaction is closed we can immediately begin generating revenue from S. Yet.
Speaker Change: Over 100 patient visits have already been booked starting in early June and several hundred more SCN patients are in process of being booked by our team in.
Speaker Change: In short we plan to hit the ground running to get the most we can out of this acquisition as quickly as possible.
Speaker Change: It is probably worth restating the importance of this SCN transaction for vivo.
Speaker Change: In a prior communication I use the term transformational.
Speaker Change: The closer we get to actually executing the transaction and beginning operations the more of that term seems appropriate.
Speaker Change: We continue to believe it will be a total game changer forgive us.
Speaker Change: Simply put we strongly believe SCN and future transactions like S E N.
Speaker Change: Which we are actively exploring as well is the fastest path to getting the most OSA patients into vivo treatment at the highest level of revenue and profit per case to the company.
Speaker Change: Now let me walk you through once again why we're so bullish on this transaction.
Speaker Change: Number one.
Speaker Change: As mentioned S. C N tests over 3000, new patients per month for obstructive sleep apnea and other sleep disorders.
Speaker Change: Approximately 90% of those patients test positive for OSA or related conditions.
Speaker Change: At least to start logistically, we may not be able to capture all of those folks for vivo suppliance treatment, but we expect to convert a good number of them as well as capture diagnostic revenue.
Speaker Change: Why do we believe this this is point number two.
Speaker Change: In our experience with our first strategic alliance with Rebus health right here in Colorado.
We have seen seven out of 10 patients selecting some form of vivo treatment oversee pack.
Speaker Change: At an average revenue per case exceeding $4500.
After months of intense due diligence and analysis at F. C N. We.
Speaker Change: We see no reason, we would not ultimately realize similar levels of case acceptance and revenue there.
Speaker Change: Number three in fact.
Speaker Change: Our plan is to add several new diagnostic and therapeutic services to our overall patient offerings, which we expect will yield even higher levels of revenue at SCE and as compared to reap itself, which.
Speaker Change: Admittedly has progressed more slowly than we would have liked due to internal issues at <unk> that were beyond our control.
Speaker Change: Point number four.
Speaker Change: The net contribution margins for SDN revenue is expected to be 50% or better.
Speaker Change: Point number five.
Speaker Change: Simple math tells the story, even if we cut the above forecast figures in half.
Speaker Change: This transaction holds the prospect of solving our cash burn and generating significant positive cash flows and profits by the end of 2025 as we seek to ramp up to up to full capacity over the next six months.
Speaker Change: With a successful transaction closing and launch we will also be proving out our thesis around the tremendous untapped potential for us in working directly with sleep labs and sleep medicine specialists.
Speaker Change: There are literally thousands of sleep medicine doctors with ties to sleep centers across the country, who are in need of additional viable treatment options for their OSA patients. Moreover, no. Other company can bring to such marginally profitable sleep testing operations, the kind of comprehensive state of the art.
Speaker Change: Technology, the kinds of hands on operational experience and the kind of the high margin profit opportunity that vivo springs.
Speaker Change: Not to mention that in our experience we represent the most patient friendly and preferred treatment modalities on the market today.
Speaker Change: Making vivo attractive not only to sleep center owners, but their patients as well.
Speaker Change: As we have previously mentioned our business development and M&A team has been extremely busy fielding inquiries and calling on target companies across the country to explain our extraordinary value proposition.
Speaker Change: The reception across the sleep medicine community has exceeded our expectations and we are finding a lot of interest in vivo.
Speaker Change: We are currently in active negotiations with several groups for affiliation or acquisition opportunities.
Speaker Change: Some groups are larger than SCN.
Speaker Change: Some are smaller yet each hold significant upside potential for vivo as.
Speaker Change: We consider some of those negotiations to be in advanced stages, and we hope to be able to announce additional transactions from that pipeline in the future.
Speaker Change: Now I would also remind everyone that our management team here at Devos has extensive experience in targeting.
Speaker Change: Quiring and rolling up professional practices across the country. We've done this very thing quite successfully in a prior company in the dental space.
Speaker Change: Hi, and senior members of the management team launched and grew one of the very first dental service organizations or Dsos back in 1995 and built it from scratch to over $250 million in revenue with over 165 locations. When we sold it in 2000.
Speaker Change: Eight.
Speaker Change: To get to 165 locations, we acquired nearly 400 independent dental practices throughout our market footprint.
Speaker Change: Today, the overall DSO business in the United States is a multibillion dollar market with tens of thousands of affiliated DSO offices around the country.
Speaker Change: Yet here at vivo, so we see this opportunity and sleep medicine, as having even greater financial upside than our previous focus exclusively on dentistry.
Speaker Change: In sum, having successfully weaned ourselves off of our prior VIP driven model.
Speaker Change: We now feel that S. C. N is just beginning of a very promising very promising time for vivo.
Speaker Change: And we look forward to continuing the rollout and execution of our new strategy.
Speaker Change: Now, let me turn the call back over to our Chief Financial Officer, Brad Ammann to review in greater detail, our first quarter financial results Brad. Thank.
Brad Ammann: Thank you Kirk and good afternoon, everyone. Today I will review the highlights of our financial results for the first quarter of 2025.
Brad Ammann: For further information on our results for the three months period ended March 31, 2025, 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 first quarter 2025, total revenue of $3 million compared to $3 4 million for the first quarter of 2024 year over year decrease was due to lower service revenue in particular, VIP enrollment revenue, resulting from leave US as chart.
Curt Huntsman: Change in our marketing and sales strategy as Kirk discussed specifically revenue generated from VIP enrollments decreased $700000, which was offset by an increase of approximately 100000 in vivo <unk> product sales and 200000 from sponsorship conference and training revenue.
Curt Huntsman: We sold 3736 or oral appliance arches during the first quarter of 2025 for a total of approximately.
Curt Huntsman: Approximately $1.8 million compared to 1996 during the first quarter of 'twenty 'twenty four for $1.7 million.
Curt Huntsman: The 8% year over year increase in product sales is attributable in part to higher volume in sales of our guide, which are lower revenue generating products compared to our view of us care appliances.
Curt Huntsman: Lastly, during the first quarters of 2024 and 2025, our billing intelligence service and matter of fact, while therapy service revenue remained relatively unchanged at $200000 in each of those areas. During these respective periods.
Curt Huntsman: Also during the first quarters of 2025 and 'twenty 'twenty four we recognized 300000 in sleep testing service revenue.
Curt Huntsman: Cost of sales remained relatively constant for the comparable periods at 1.5 million.
Curt Huntsman: This related to higher costs associated with appliances, driven by the higher product sales.
Curt Huntsman: Offset by lower costs associated with medical reporting expenses and VIP membership support cost as a result of not having any VIP enrollments during the period.
Curt Huntsman: Gross profit was $1 5 million for the first quarter of 2025 compared to gross profit of $1 9 million for the comparable period in 2024.
Curt Huntsman: The decrease was primarily primarily attributable to the decrease in revenue and partially offset by a decrease in cost of sales driven by the lower VIP enrollments and higher sales of appliances.
Curt Huntsman: Gross margin for the first quarter of 2025 was 50% compared to 57% for the first quarter of 2024 due to the decrease in VIP service revenue.
Curt Huntsman: Sales and marketing expenses were $400000 for the first quarter of 2025 compared to 700000 in the comparable prior year period.
Curt Huntsman: This decrease in cost reflects lower sales commissions and marketing expenses as we pivot to our new marketing and distribution model.
Curt Huntsman: General and administrative expenses decreased slightly by 1% with $4 9 million for the both the first quarters of 2025 and 2024.
Curt Huntsman: Total operating expenses.
Curt Huntsman: For the first quarter of 2025 decreased 300000 or 5% versus the first quarter of 2020 for.
Curt Huntsman: This is mainly due to the cost cutting initiatives, we have taken beginning in 2023 and throughout 2024, which is important as we continue to pivot to our new model.
Curt Huntsman: Operating loss for the first quarter of 2025 was approximately $3 9 million compared to 3.8 million loss for the first quarter of 2024.
Curt Huntsman: The slight decrease in operating loss was primarily from lower total sales offset by lower operating expenses from the cost cutting initiatives.
Curt Huntsman: Net loss for the first quarter of 2025 was $3 $9 million compared to a loss of $3 8 million for the first quarter of 2024.
Curt Huntsman: Turning to our statement of cash flows.
Curt Huntsman: Cash used in operations for the quarter ended March 31, 2025 was $3 $8 million at 1.3 million increase compared to 2.5 million during the comparable prior year period the.
Curt Huntsman: The increase is due primarily to a reduction in our contract liability of 900000, and a decrease in accrued expenses and accounts payable of 800000.
Curt Huntsman: All set by an increase in other liabilities of 400000.
Curt Huntsman: For the quarter ended March 31, 2024, net cash used in investing activities of 100000 consisted of capital expenditures for software.
Curt Huntsman: Yeah.
Curt Huntsman: Related to the development of ordering software for internal use which was placed in service during the quarter.
Curt Huntsman: This compares to net cash used in investing activities of 200000 in the comparable 2024 period.
Curt Huntsman: Rising from capital expenditures for the ordering software.
Curt Huntsman: Note that our ordering software was placed into service during the quarter.
Curt Huntsman: No cash was provided by financing activities for the three months ended March 31, 2025, as compared to 3.6 million of net cash provided in financing activities for the three months ended March 31 2024.
Curt Huntsman: Attributable to the proceeds of $3 9 million from the issuance of common stock net of approximately 300000 of professional fees and other issuance cost from the February 2024 warrant inducement transaction.
Curt Huntsman: As of March 31, 2025, we had approximately $2 3 million in cash and cash equivalents compared to $6 3 million as of December 31, 2024.
Curt Huntsman: As Curt mentioned, we are actively thinking financing.
Curt Huntsman: To close the S E S.
Curt Huntsman: S C N transaction and bolster our cash position.
Kirk: Thank you all again for joining us in today's conference call now, let me turn the call back over to Kirk.
Brad Ammann: Thank you Brad.
Brad Ammann: That concludes our prepared remarks, now we'll be happy to take questions.
Brad Ammann: Operator.
Brad Ammann: Okay.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your Touchtone phone.
Speaker Change: Been here, a prompt that youre kind of spring release.
Speaker Change: Should you wish to decline from the polling process. Please press star followed by the number too.
Speaker Change: If you're using a speaker phone please lift the handset before pressing any keys.
Speaker Change: Your first question comes from the line of dull Kim from water Tower Research. Your line is now open.
Speaker Change: Great Hi, Kirk and Brad Thanks for taking my questions and congrats on the <unk> acquisition.
Speaker Change: Correct.
Speaker Change: That you can expand a little bit more on the experience with the reverse alliance and how.
Speaker Change: How its contribution has been so far and what that is in comparison to your expectations when the partnership started.
Speaker Change: Yeah, that's a great question and I appreciate you asking that.
Speaker Change: No look it's a it's gone a lot slower than what we had expected when we signed up with them a little about a year ago.
Speaker Change: You know quite honestly rebus has had some.
Speaker Change: Very difficult.
Speaker Change: Things that they've been working through internally just sort of.
Speaker Change: With their change of ownership and some management are you know issues going on internal to them and as a result, the the top of the funnel that we had expected from from Rebase, where they would be referring.
Speaker Change: A certain number of patients over to US is just never materialized and it's.
Speaker Change: It's frustrating because we haven't seen the volumes that we were expecting.
Speaker Change: So what we've what we focused on quite honestly dough as we focused on I'm.
Speaker Change: Just making sure that we were accomplishing the things that we had control over which meant that every patient.
Speaker Change: Became even more precious and every patient got a lot of attention because we didn't have the high volume so but what we learned there was really important because we basically proved our thesis one of the key pieces that we had going into this venture with that with Reavis was that that we could take patients out of a sleep lab.
Speaker Change: Testing.
Speaker Change: The orientation of sleep testing facility and that we could basically when when we would present those patients with a full spectrum of treatment opportunities or treatment options, rather that they would treat that or a large portion of those patients would select the most.
Speaker Change: And we've proven that right we have.
Speaker Change: And you know instead of several several several thousand patients. We have several hundred patients that are you know there are the the data points that we have so that the cohort of of opportunities has not been as great. But they are a core thesis that that 70, I think the number is 71%.
Speaker Change: Last I checked 71% of patients who had been presented with vivo as an alternative to CPAP selected vivo some form of vivo treatment. We have a variety of different treatments is not just our vivo as care devices, but across the spectrum right and so so knowing that.
Speaker Change: We are extremely encouraged by what we have that we're about to step into down on Las Vegas, because if we can convert that number of patients under somewhat adverse circumstances or let's just say less than ideal circumstances. At rebus. Then we think when we can control the funnel top to bottom.
Speaker Change: Actually owning the center.
Speaker Change: I think we have a much better shot at a at a comparable or even greater percentage of patients taking vivo. So.
Speaker Change: You know that there are there are there are some rebates revenues incorporated into our first quarter earnings and and but theyre not theyre not material theyre not theyre not necessarily as significant obviously as we'd hope, but when we when we show, 71% and an average patient.
Speaker Change: Revenue per case of about $4500 and we then apply that those same metrics to what we are.
Speaker Change: Well, what we're walking into down there and in Las Vegas, I mean, the numbers just just look really really strong. So I guess good news bad news on the on the reverse front.
Speaker Change: Not giving up on that thing, yet exactly where our silica a private equity partner a large shareholder here at Veeva.
Speaker Change: Seneca has a a significant investment in rebase and they are working diligently to shore up the management team to help correct. Some of the internal challenges that reverses has faced and and we're hopeful we're still hopeful there, but it's at I think it remains to be.
Speaker Change: Seen how that's all going to unfold, so I think for our for our focus and our purposes.
Speaker Change: The money shot is really in Las Vegas for Us right now.
Speaker Change: That makes sense.
Speaker Change: And it sounds like you anticipate the integration of of the Fleet Center in Nevada to go a lot better than Riva you've already booked.
Speaker Change: I think you said over 100 patients for June.
Speaker Change: When you.
Speaker Change: Look at the first strategic alliance with Riva, what can you take away. When you are negotiating other potential partners or acquisition targets are there certain elements or the conditions.
Speaker Change: The centers that you would have to take a much closer look at too.
Speaker Change: Proceed with that transaction.
Speaker Change: Yeah, I think that's another really good question, so I mean.
Speaker Change: I mean look we.
Speaker Change: We have as I mentioned also earlier, we have a long history. This management team.
Speaker Change: Has a long history of successfully acquiring and integrating.
Speaker Change: Professional practices into a larger.
Speaker Change: Corporate organization.
Speaker Change: And so the truth of the matter is though that sometimes you just get a.
Speaker Change: Circumstances that are hard to force a hard to foresee in the beginning but you just could circumstances that you have to work through.
Speaker Change: And sometimes things don't go as smoothly or as quickly as you would like and I think that's kind of what we have up there, but as far as what we've learned.
Yes, I think we have learned some things we've learned a lot about optimizing in a medical.
Speaker Change: Insurance orientation orientated environment.
Speaker Change: We've learned a lot about how to optimize revenues how to optimize.
Speaker Change: Sort of the services that are offered to these patients because you know.
Speaker Change: Patients are sensitive many times to what their insurance is going to pay in and what their status is and we've learned to evaluate that and and and sort of work with them and sometimes around some of the constraints that some of the payers put on their on their patient all of that is is really positive learnings.
Speaker Change: For us as we as we go down to.
Speaker Change: Two.
Speaker Change: Las Vegas, and as we look at some of the other partnering type relationships, which we have.
Speaker Change: Again, we have some of those in the pipeline here, we're looking at those things now.
Speaker Change: With a a real close eye.
Speaker Change: Scrutiny around what kind of a partner do we expect these people are going to be and how are we are we've actually changed and modified a couple of things in the documents that give us just a little more control over.
Speaker Change: The the the flow and the process. So that we don't get bogged down in things that we ought not to get bogged down and then we can insure.
Speaker Change: The steady stream of patients just just just sort of making sure that all the all the roadblocks or taken away, but I think there have been some learnings it's hard for me to articulate exactly what they all might be but there is definitely things from an operation standpoint, and a deal structure standpoint that we've taken away. So.
Speaker Change: Okay. Thanks for taking my question as Kirk and I look forward to your progress on that.
Speaker Change: Las Vegas acquisition.
Speaker Change: Alright, thank you.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Lukas Ward from <unk> capital markets. Your line is now open.
Speaker Change: Thank you good afternoon gentlemen.
Speaker Change: Hi, Lucas Lucas.
Speaker Change: I was wondering if you could help us understand the impact on the P&L of the acquisition. So for instance in Q3 like how much revenue would be added from S. CNS revenues and how much cost.
Speaker Change: And when would you expect the acquisition to become accretive.
Speaker Change: Yeah.
Brad do you want to take the first half of that and I'll take the second half yeah.
Speaker Change: The acquisition of S. C. N has some legacy revenue and legacy expense.
Speaker Change: <unk> expenses that will be accretive to to vivo. So they are currently operating at a net income position.
Speaker Change: We'll be able to leverage onto.
Speaker Change: The.
Speaker Change: The patience as we've discussed in this call will be able to utilize the 3000 patients that they see on a monthly basis and a portion of those test positive or OSA.
Speaker Change: And a portion of the people that test positive or want to go into Veeva appliances, and we'll be selling basically at.
Speaker Change: At a retail price to the patients.
Speaker Change: Rather than a wholesale price to the dentist, who it turns around and marks apter.
Speaker Change: The price to the patient so it made basically in this model will take out the middleman and so the economics on a revenue basis are much more favorable to vivo OS.
Speaker Change: They had been in the past and that was really what's attractive about this this model.
Speaker Change: In addition.
Speaker Change: We're paying the dentists.
Speaker Change: As a as a salaried employee.
Speaker Change: Rather than you know.
Speaker Change: Treating them as a as a wholesaler and so there'll be some additional costs associated with payroll and bringing those on.
Speaker Change: And Thats part of our cost of sales so that that part cost of sales will will increase but the revenue will.
Speaker Change: More than.
Speaker Change: Offset the additional cost of.
Speaker Change: Of the having employees doctors as employees. So there's a huge advantage for vivo. So in this model and.
Curt Kannenberg: With that I'll turn it back over to Curt to yeah.
Speaker Change: Yes, I think the other part of your of your question Lucas, which is a good one by the way I think the other part of that had to do with like when should we expect the accretion to show up and.
Curt Kannenberg:
Curt Kannenberg: It might be a little bit aggressive to say this but I actually think that youre going to see this in the third quarter.
Curt Kannenberg: We expect to see coming right out of the gate. We we are stacking I was out in Las Vegas, just a week or two ago and I was at the facility.
Curt Kannenberg: We have as we have built out probably five or 6000 square feet adjacent to that.
What are the main treatment centers are not treatment center, but testing centers that CN has there in Las Vegas, and and we have we're the places is just about finished ready to rock and roll we will be ready by the time, we close and patients like we said are already being booked I was standing in the lobby of the.
Curt Kannenberg: Testing center upstairs.
Curt Kannenberg: And patients were six and eight deep being being brought out by the.
Curt Kannenberg: By the doctors and and enthusiastically being encouraged us to set up an appointment to get treatment with with vivo started to get into evaluation and.
Curt Kannenberg: We've put well over 100 patients on the books already for new appointments I think our first week and a half is almost completely booked.
Curt Kannenberg: Booked out and so we're adding we're adding capacity, we're adding new patients on a daily basis, but I expect as a result of that.
Curt Kannenberg: Just some of the diagnostic services that we're adding to what SDN is already doing will be immediately accretive in some major ways and so even even with just the testing and diagnostic part of what we're what we're bringing to the table we should be we should see revenue.
Curt Kannenberg: And revenue cycle turning into cash.
Curt Kannenberg: In Q Q3, rather rather significantly so.
Curt Kannenberg: Again, we have the potential here of in the very near term just sort of eliminating our burn and that's our goal is to make sure that we start turning cash flow positive as rapidly as possible and we see this as being the main way to do that but it will it won't take six months for us to do that it will take a month or two it'll be in the third quarter is our current forecast.
Curt Kannenberg: Got you that's great.
Speaker Change: I guess sort of a follow up then should when we model operating expenses should we model a sequential they've been going down quarter on quarter for a while would they.
Curt Kannenberg: Up in Q3, and Q4 because of the.
Speaker Change: The absorption.
Speaker Change: Yeah, I would I would estimate that they will because we have had you know we were we were dropping personnel and dropping personnel and dropping SG&A and all kinds of things and now we're having to just out of necessity. We've had to hire people out there we've had to train them. We've had to prepare them we've had too.
Speaker Change: Get the get the whole facility.
Speaker Change: It out and put together and so there will be in the early stages here, there's going to be a an uptick in some of those kind of of.
Speaker Change: Staffing level and doctor level expenses, as Brad alluded to but but.
Speaker Change: The revenues will quickly quickly.
Speaker Change: Account for that and and so we do have we do believe that they that the growth in revenues will very quickly outpace any.
Incremental spending that we're going to have an and and leave us with some some nice a.
Speaker Change: <unk> cash and cash flow that we can we can offset sort of our historical legacy.
Speaker Change: Byrne and get us into a cash flow positive thing really quick that's our that's our objective that's our goal.
Speaker Change: Okay. Thanks, Kirk So last question. According to press release, the acquisition price was $9 million.
Speaker Change: I'm just curious how you arrived at that like how was how was it valued.
Speaker Change: Yeah.
Speaker Change: Well, we took a look at so we hired a an accounting firm to to.
Speaker Change: Give us a quality of earnings report and.
Speaker Change: And we looked at that quality of earnings report.
And we evaluated the the the analysis that they did and we also looked at it from the standpoint of what.
Speaker Change: What kind of value.
Speaker Change: Value add it would be for vivo <unk> and.
Speaker Change: We ended up paying a I think a.
Speaker Change: Fairly.
Speaker Change: Good multiple on the on the overall transaction.
Speaker Change: But in reality the primary analysis was how many patients where we're going to be able to see out of there I mean, we could literally have doubled our price for this thing and still made it a very very lucrative transaction.
Speaker Change: We didn't go crazy like that but we did offer doctor probably who in his his his wife who own the this.
Speaker Change: Sleep Center in Nevada, we offer them a very fair price we offer we put some.
Speaker Change: Opportunities for them to earn a little bit more based on performance, we wanted to align the incentives and so you know.
Speaker Change: I think it was a combination of what that practice or what that business had has an intrinsic value in and of itself how much revenue and profit it could throw off and then but primarily what we wanted to do is we wanted to see how many patients.
Speaker Change: We're going to be.
Speaker Change: They were going to generate and frankly, they have we keep using 3000 patients but they they recently opened up some facilities that are not yet fully online and are just not even really reaching their potential so that number could could easily approach 4000 or more as we go down the road. So we saw.
Speaker Change: The potential there we saw existing patients in a confined market. We looked at other sleep groups. We've seen a few that are kind of national in scope.
Speaker Change: That.
Speaker Change: They didn't hold out the same appeal to us they weren't worth as much to us even though they saw they had more volume on their test their tests were scattered over a larger geographic area some of them nationwide.
Speaker Change: That makes it really difficult when you don't have the concentration of patients in a single market or a single area. It makes it a lot more difficult to rationalize the value proposition. So.
Speaker Change: That we had.
Speaker Change: A single market.
Speaker Change: A moderately sized market like Las Vegas, where we had a concentration we had a market leader in that market. I mean this is the go to.
Speaker Change: Sleep testing centre for 37 hospitals in that market is really this this group. So we've got literally hundreds and I don't know if its thousands but there's a lot of referral sources that are coming into and feeding this and so there was a whole lot of analysis that went into that and.
Speaker Change: And again it was a combination of some things and Doctor probably who.
Speaker Change: The owner there is going to remain on.
Speaker Change: And the continuity of him being willing to remain on and stay with this is another factor that we had again trying to derisk the whole transaction and make sure that where we show the world that just the fact that we're now there with him and where we.
Speaker Change: We're working hand in glove that that to me that that says a lot in sensors, a strong message to referral sources that he is 100% bought in on this and that he has.
Speaker Change: Behind us so all of these things I think went into that valuation and and then we were just we just pencil it out negotiated a few things are.
Speaker Change: Made a few adjustments frankly.
Speaker Change: And got to the $9 million, but were.
Speaker Change: That's where we are so $6 million of that I think as you know $6 million of that is cash and the rest of it is either vivo stock or some incentives to get him a little bit higher.
Speaker Change: Payout, yes, Lucas just to put a little finer.
Speaker Change: Sharp sharpen the pencil on that are there.
Speaker Change: $6 million of cash.
Speaker Change: And one and a half million of equity Ah is paid at the beginning and then there's another $1 5 million of equity, which is based on achievement of certain financial milestones. So it's contingent consideration.
Speaker Change: To make up the full 9 million. So the the last one and a half million is is you know, we we get dark dark good doctors.
Speaker Change: Brian because you don't want to achieve that and so I think that just makes up for a win win.
Speaker Change: Transaction for both parties.
Speaker Change: That's a good point spread thank you.
Okay, great. Thanks, so much I appreciate it.
Speaker Change: Alright.
Speaker Change: Yeah.
Speaker Change: As a reminder, if you have a question please press star one.
Speaker Change: Okay.
Speaker Change: There are no further questions at this time I will now turn the call over to Kirk Huntsman. Please continue.
Kirk Huntsman: Thank you operator.
Speaker Change:
Speaker Change: I just would like to thank everyone and I know some of them I recognize some of the names on this call. Some of you guys have been invested with vivo for quite a while some of your new but I just want to say how much we appreciate.
Speaker Change: The way that our investors are core investors have sort of hung in there with us as we've navigated this.
Speaker Change: This journey.
Speaker Change: Vivo has an amazing technology, we've now treated I think the numbers up close to or over 70000 patients and we continue to.
Speaker Change: We continue to see miracles happening with this technology and lives being altered and and really doing some good and yet we haven't found a way to monetize this in a way that's that's.
Speaker Change: That are deserving of what this what this technology is bringing to the world. We do believe we now have this and we do believe with all our hearts that this is the right place and the right time to be making this pivot and we're grateful for the patients that the investment community has shown we're grateful for the support of.
Speaker Change: Our private equity partner in particular.
Speaker Change: The group over at <unk>.
Speaker Change: Seneca has been amazing to work with and.
Speaker Change: Been supportive all the way as we've gone through this and I think if you speak to them, you'll you'll see it in equal degree of Av.
Speaker Change: Enthusiasm and an outlook a bright outlook for the future here. So again, thank you everyone for being here and listening today, we look forward to sharing our continued progress with each of you as we continue to execute on our plans throughout the remainder of this year.
Speaker Change: Thank you all and have a great evening.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Yeah.