Vivos Therapeutics, Inc.

Good day everyone and welcome to the Vivos Therapeutics First Quarter 2024 Earnings Conference 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 being recorded and a replay of today's call will be available on the Investor Relations section of Vivos' website and will remain posted there for the next 30 days. I will now hand the call over to Julie Gannon, Vivos Investor Relations Officer, for introductions and reading of the Safe Harbor Statement. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to our conference call. A copy of our earnings press release is available on the Investor Relations section of our website at www.vivos.com. With us on today's call are Kirk Huntsman, Vivos Chairman and Chief Executive Officer, and Brad Ammon, Chief Financial Officer. Today, we'll review the highlights and financial results for the first quarter, 2024, as well as more recent developments and Vivos plans for the rest of 2024. Following these formal remarks, we will be happy to take questions. 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 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended concerning future events. Words such as aim, may, could, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates, goal, and variations of such word and similar expressions are intended to identify forward-looking statements. These statements involve significant known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant risks, uncertainties, and contingencies, many of which are beyond the company's control. Actual results, including without limitation, the results of Vivos growth strategies, operational plans, including sales, marketing, product acquisition and integration, research and development, regulatory initiatives, cost savings plans, and plans to generate revenue, as well as future potential results of operations or operating metrics, such as the potential for Vivos to achieve future positive cash flows or profitability, and other matters to be addressed by Vivos management in this conference call may differ materially and adversely from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the risk factors described and other disclosures contained in VEVO's filings with the Security and Exchange Commission, including the risk factors and other disclosures in our Form 10-K for the year ended December 31, 2023, 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 Vivos' website as well as the SEC's website. Except to the extent required by law, Vivos assumes no obligation to update statements as circumstances change. Finally, please be aware that the U.S. Food and Drug Administration has given certain Vivos appliances 510 clearance to treat mild to severe OSA. With the FDA clearance for severe last November, treatment of patients with severe OSA no longer needs to be performed off-label at the clinical discretion of the treating doctor, as it is now an integral part of the vivos treatment protocol. Now at this time, it is my pleasure to introduce Brad Ammon, CFO of vivos. Brad, please go ahead.

Thank you, Julie. And good afternoon, everyone. Today, I will review the highlights of our financial results for the first quarter of 2024. For further information on our results for the three-month period ended March 31st, 2024, please see our earnings release, which was distributed earlier today and our quarterly report on Form 10Q, which is available on the SEC filings portion of the Investor Relations section of our website, as Julie mentioned, vivos.com forward slash investor dash relations. Today, we report first quarter 2024 total revenue of $3.4 million compared to $3.8 million for the first quarter of 2023. The year-over-year decrease was due to $400,000 lower revenue generated from VIP enrollments and $200,000 less in appliance sales, offset by an increase of approximately $100,000 in pediatric and lifeline product sales to VIPs and an increase of approximately $100,000 from revenue generated by our home sleep test ring lease program. While revenue is essentially flat, we were pleased that the expansion of our product offerings, which were introduced last year, including the pediatric and lifeline products, have started to become additive to revenue. During the first quarter of 2024, we enrolled 50 VIPs and recognized VIP enrollment revenue of approximately $900,000 compared to 36 VIPs for a total of approximately 1.3 million in revenue during the same period last year. While the number of VIP enrollments increased, revenue was impacted by updates to key inputs in our revenue recognition methodology, primarily estimated customer lives, and the addition of new entry levels into the VIP program at a lower price point. We sold 1,996 oral appliance arches during the first quarter of 2024 for a total of approximately $1.7 million dollars compared to $2,369 during the first quarter of 2023 for $1.8 million. The decrease in revenue is due in part to fewer product discounts in the first quarter of 2024 than in the first quarter of 2023. Lastly, during the first quarters of 2024 and 2023, our billing, intelligence services, and myofunctional therapy services revenue remained relatively unchanged at $200,000 in each of these areas during these respective periods. During the first quarters of 2024 and 2023, we also recognized $100,000 in sponsorship, seminar, and other revenue. Our revenue during the first quarter of 2024 was impacted by increases in estimated VIP customer lives which are calculated separately each year and was estimated to be 27 months in 2024, an increase of 17% compared to 23 months in 2023. This impacts the amortization of revenue to be spread over a longer period of time, thus decreasing the revenue that is recognized over the same period when compared to 2023. Although this negatively impacts our revenue recognition, It is a result of VIPs staying active for a longer period of time, thus increasing our customer retention year over year. Additionally, our revenue is impacted by new entry levels into the VIP program, ranging from $2,500 to $50,000, and adding an $8,000 pediatric program, which was received positively by our VIPs. However, it also results in lower revenue per contract. This coupled with fewer enrollments in 2023 resulted in lower revenue for the first quarter of 2024. As Kirk will talk about in just a bit, in the near term, we are planning on launching a new strategic revenue initiative based upon collaborations to better align our interest with referring medical professionals, which we expect to materially broaden the number of OSA patients who have access to our products. and make our revenue less on VIP enrollments going forward. Gross profit was $1.9 million for the first quarter of 2024 compared to gross profit of $2.3 million for the comparable period in 2023. The decrease was primarily attributable to the decrease in revenue and partially offset by a decrease in cost of sales driven by lower VIP enrollment and appliance sales. Gross margin for the first quarter of 2024 was 57% compared to 61% for the first quarter of 2023. Sales and marketing expense were $700,000 for the first quarter of 2024 compared to slightly over $600,000 in the comparable prior year period. The slight increase represents higher sales commissions as well as sales-related and digital marketing expenses. As most of you are aware, we have been significantly lowering our burn rate over the past year and a half to make our company more efficient as we seek to achieve cash flow positive operations. This trend continued in the first quarter as we again achieved a significant reduction in general and administrative expenses. For the first quarter of 2024, G&A expenses decreased by $1.6 million, or approximately 25%, to $4.9 million compared to $6.5 million for the first quarter last year. This year-over-year decrease reflects the success of our previously announced cost-cutting efforts and lays a foundation for positive results from operations as we look to increase revenues. Total operating expenses for the first quarter of 2024 decreased by a significant amount, million or 22% versus the first quarter of 2023. This represents our seventh consecutive quarter where we have reported year-over-year decreases in operating expenses, and it is mainly due to the cost-cutting initiatives we have undertaken throughout 2023 as well as in 2024. Operating loss for the first quarter of 2024 was approximately $3.8 million, a $1.2 million or 24% improvement, compared to $5 million loss for the first quarter of last year. The year-over-year decrease in operating loss was primarily from lower G&A due to the cost-cutting initiatives I just mentioned. Net loss for the first quarter of 2024 was $3.8 million compared to a loss of $1.7 million for the first quarter of 2023. Please note the year-over-year comparison reflects a one-time benefit of $3.2 million of non-cash, other income, that Vivos recognized in last year's first quarter. In the absence of the one-time benefit of $3.2 million, our net loss for the first quarter of 2023 would have been $5 million in Q1 2023, which equates to a 24% reduction in net loss on a normalized basis. To offer some additional details for clarity, the first quarter of 2023, Vivos recognized Approximately $6.5 million is a one-time non-operating expense related to the difference between excess fair value from warrants issued in our January 2023 private placement and the net proceeds that we received from that transaction. The change in fair value of the warrant liability in the first quarter of 2023 was $9.6 million at net of issuance costs of $600,000. As a result, Vivos recognized $3.2 million of non-cash other income in the first quarter of last year, which was the net impact of the private placement warrants. Please refer to our 10-Q for further details regarding this. Now turning to our statement of cash flows. Cash burned from operations for the quarter ended March 31st, 2024, was $2.5 million, a $1 million decrease compared to $3.5 million during the comparable period last year. This decrease is due primarily to the absence of a favorable net change and fair value warrant liability of $10.2 million offset by day one non-operating warrant expense of $6.5 million. For the quarter ended March 31, 2024, net cash used in investing activities of $200,000 consisted of capital expenditures for software related to the development of VIP ordering software for internal use, which is expected to be placed into service here in the second quarter of the year. This compares to net cash used in investing activities of $300,000 in the comparable 2023 period arising from capital expenditures for the same ordering software, as well as a $50,000 asset purchase. For the quarter ended March 31st, 2024, net cash provided from financing activities of 3.6 million related to our February warrant inducement transaction. This compares to net cash provided from financing activities in the comparable 2023 period of 7.4 million reflecting our January 2023 private placement. As previously announced, to augment our liquidity position, and stockholders' equity, in February 2024, Vivos entered into an agreement for the exercise of an outstanding common stock purchase warrant held by an institutional investor to purchase an aggregate of 980,393 shares of Vivos common stock for gross proceeds to the company of approximately $4 million. This transaction closed on February 20, 2024. As of March 31, 2024, we had $2.6 million in cash and cash equivalents compared to $1.6 million as of December 31, 2023. In conclusion, during the first quarter, we continued taking steps to drive future revenue growth, strengthen our cash position, and to improve our cost structure and reduce cash burn. Our progress gives us renewed confidence in our long-term prospects and we continue to target becoming cash flow positive from operations by the end of 2024 or first quarter of 2025. I want to thank you all again for joining us on today's conference call. Now it's my privilege to turn the call over to Kirk Huntsman, Chairman and CEO. Kirk, please go ahead.