Vivos Therapeutics, Inc.

Good day, everyone, and welcome to the Vivo's second quarter 2025 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 Vivo's website and will remain posted there for the next 30 days. I will now hand the call over to Mr. Brad Ammon, Chief Financial Officer for Introductions and the 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 me on the call today is Kirk Huntsman, Vivos chairman and chief executive officer. Today, we'll review the financial results for the second quarter 2025, as well as more recent developments and Vivos' plans for the rest of the 2025 and beyond. Following these formal remarks, we will be happy to take questions. I would like to remind everyone that today's call will contain 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 words and similar expressions are intended to identify fourth statements. These statements involve significant known and unknown risks that 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, distribution, medical sleep provider 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 risk factors described in other disclosures contained in VIVOS's filings with the Securities and Exchange Commission including the risk factors and other disclosures in our Form 10-K for the year-ended December 31st, 2024, and our other filings with the SEC, including our second quarter, 10-Q, which was filed today with the SEC, all of which are or will be accessible on the investor relations section of VIVO's website as well as the SEC 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 specific vivos appliances 510 clearance to treat mild to severe OSA. With the FDA clearance of certain vivos products for severe OSA in November of 2023, treatment of patients with severe OSA with these specific appliances is no longer needed to be performed off-label at the clinical discretion of the treating doctor and is now an integral part of the vivos treatment protocol. Treatment of OSA of any severity or any other condition with any other vivos FDA cleared devices remains at the clinical discretion of the treating doctor. For further information on our results, for the three and six-month periods ended June 30th, 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. In the second quarter of 2025, Vivos achieved a major milestone in our pivot of our sales, marketing, and distribution model to focus on sleep, center, provider-based alliances and acquisitions with our June 10, 2025 acquisition of the Sleep Center of Nevada. Kirk will discuss the exciting progress we have made to date on SCN and its importance to vivos. While this was occurring, we continued to wean ourselves off of our legacy VIP enrollment revenue. The combination caused us to experience some expected increases in costs much of which related to SEN, and declines in VIP enrollment revenue, where VIPs pay vivos to get trained. For the second quarter of 2025, we saw a slight decrease in revenue, down about 6% to $3.8 million, compared to $4.1 million in the second quarter of 2024. The decline in revenue reflects additional expenses related to the transition and integration of our SCN into our operations. On the product side, appliance discounts impacted product sales by $600,000. However, we saw a silver lining as our guide sales picked up, offsetting the decrease by half a million dollars. In services, while VIP enrollment revenue declined by a million dollars in the second quarter, we made significant gains elsewhere. Importantly, we saw an immediate $500,000 uplift in sleep testing service revenue attributable to SCN. And that's just for the period from June 10th, which was the SCN closing, through the end of the quarter. We are very encouraged by this. We saw a $400,000 boost in sponsorship, seminar, and other service revenue as well. Looking at the first half of 2025, our revenue decreased by $600,000 to $6.8 million compared to the same period in 2024. This 9% decline was primarily due to our unexpected $1.7 million drop in VIP enrollment revenue as we pivoted away from our legacy VIP-focused model. However, the expected decline in enrollment revenue was partially offset by increases in sleep testing revenue of a half a million dollars from SCN, as noted, and increases in sponsorship and seminar revenue of a half a million dollars. Our oral appliance sales also tell an interesting story. In second quarter, we sold 4,116 arches for $1.9 million, a 5% revenue decrease from second quarter of 24. This shift reflects our higher volume of guide sales, which generate lower revenue compared to our more advanced care appliances. Cost of sales and operating expenses increased significantly, primarily due to our acquisition and integration of Sleep Center of Nevada. The closing of the transaction and integration of SCN led to higher quarter over quarter professional fees, personnel costs, and infrastructure expenses. The primary cause of this increase was approximately $1.8 million in costs associated with acquiring and integrating SCN, including professional fees of about $900,000, salaries and wages of approximately a half a million dollars, and infrastructure costs of approximately $300,000. Our operating loss widened to $4.9 million in second quarter and $8.8 million for the first half of 2025, reflecting these higher expenses and lower revenues during our strategic transition. On the cash flow front, we used more cash in operations and investing activities compared to last year, largely due to our acquisition efforts and increased net loss. However, as we secured significant debt in equity financing, providing us with $11.5 million in net cash from financing activities. Of note, the equity financing came from an affiliate of our existing significant investor Seneca Partners. As of June 30th, 2025, our balance sheet showed total liabilities of $21.5 million with cash and cash equivalents of $4.4 million and stockholders' equity of $4.6 million. In summary, while we are seeing some short-term impacts on our financials, these numbers reflect our ongoing transition and investment in the future of our company, particularly through the SCN acquisition, which we are extremely encouraged by, both on its own and as a catalyst to our exploration of similar acquisitions and similar sleep provider collaborations. We believe these Strategic moves are setting the stage for stronger performance in the upcoming quarters. For more detailed information, I refer you to our earnings release and to our full Form 10-Q filed earlier today. And with that, I'll hand the call over to our Chairman and CEO, Kirk Huntsman.

Thank you, Brad. Good afternoon, everyone, and thank you for joining us on today's conference call. The second quarter of 2025 was a period of significant change for Vivos and the culmination of nearly two years of laying the groundwork for our new model. As previously announced, during the second quarter and subsequently, we completed the acquisition of the Sleep Center of Nevada, which we refer to as SCN, and have been rapidly ramping up our operations there. Generally speaking, what we found there since closing the transaction in early June has been extremely encouraging and above our forecasts. First, the level of cooperation and buy-in from the existing SCN medical team and support personnel in Nevada has exceeded our expectations. In fact, two of the lead sleep MDs at SCN and their families were among our very first patients. Having the full and unwavering endorsement of the medical team at SCN who have been waiting for a viable alternative option for CPAP for their patients is critical to the ultimate success of our model. Second, there appears to be far more OSA patients interested and willing to accept vivos treatment as alternatives to CPAP than we had forecast. So much so that we are already working to expand our physical facilities and also to recruit, hire, and train additional providers and staff in order to handle the patient demand. In that respect, to date we have created and successfully deployed what we are calling sleep optimization or SO teams. Each SO team consists of approximately 16 medical, dental, and support staff who are all specially trained and equipped by vivos. At present, we have deployed one and a half new sleep optimization teams that will help drive the growth of each center. By forming discrete SO teams, we believe we can optimize productivity and collaboration among providers and staff. The primary focus of each SO team is to ensure that each and every patient is fully informed and educated about all treatment options and what might be best for their condition and situation. and then to assist them in getting into their treatment of choice, which most of the time involves Vivos products and services. In light of this progress and the growth that it portends, we worked hard to secure significant financing to fund the acquisition and to support the current and future growth of the company. As our growth trajectory continues to rise and as other similar acquisition and affiliation opportunities materialize, we fully expect to raise additional growth capital to fund that growth. Now let me return to our core message and provide you with further details on our progress at SCN and why we believe it portends well for our business model. As we've mentioned, the integration of SCN is well underway with two locations already integrated ahead of schedule and under budget. We began seeing patients late in the second quarter. As I just mentioned, initial patient demand has outpaced our capacity to service them. And we believe we are currently servicing significantly less than 40% of the potential new patients being tested each month at SCN. We also believe that there are even more legacy SCN patients out there who are either dissatisfied with their CPAP units or who have discontinued their CPAP treatment altogether and are looking for alternatives. Keep in mind that well over 200,000 OSA patients have been tested and seen by SCN providers since 2019. As I just mentioned, we have currently deployed one and a half sleep optimization or SO teams across two locations in Las Vegas. To meet the demand, we are in the process of expanding one SCN location to accommodate two full-time SO teams there. In addition, we are relocating and expanding a second SCN location where we expect to have one and a half SO teams deployed during the fourth quarter of this year, bringing our total to three and a half SO teams in that market by year end. Another full SO team is expected to be deployed in the first quarter of 2026, bringing our total to four and a half SO teams across two locations. And we currently believe that there is the potential to deploy up to eight total SO teams at SCN based on the current demand. Now to quantify this, based on our limited operating experience to date, we believe each fully operational SO team can process approximately 250 patients per month, potentially generating over 500,000 in monthly net collections with contribution margins above 50%. Obviously, there will be some ramp-up times associated with each team being able to operate at optimal levels. The existing SO teams are experiencing multi-week backlogs, and there is a sense of urgency to onboard new SO teams as quickly as possible. As mentioned in our 10-Q file today, we have several growth initiatives planned for the remainder of 2025 2026 and beyond, which have the potential to further increase our growth, our current growth, and also in new markets. Such initiatives include, but are not limited to, the expansion of diagnostic and treatment services, the establishment and rollout of a pediatric OSA program, and the collaboration with certain specialty medical groups who treat patients with comorbid OSA but who lack the ability to test, evaluate, and treat such patients within their existing practice environments. There is a usual and customary credentialing process that also affects our ability to scale that all new providers must go through with third-party payers. We are actively working with payers and our consultants to expedite that process, which we expect will take anywhere from two to six months, depending on the payer. In addition to our acquisition model like SCN in Las Vegas, Vivos has developed and refined a new collaboration management model for sleep centers not interested in being acquired. Now, unlike our 2024 strategic collaboration with Rebus Health here in Colorado, under our new and refined model, Vivos retains full operational control over the patient experience and the provision of treatment through its managed clinical practices. while collaborating with the local sleep clinic to ensure patients receive the full array of OSA treatment options. Under this new collaboration management model, in July, Vivos executed an agreement with MI Sleep, LLC, a Michigan sleep specialist entity engaged in sleep testing and OSA treatment in the greater Detroit area. We expect to have this fully operational with one full SO team deployed in the fourth quarter of this year and expect further SO teams to be deployed in 2026. We expect this new model will be very attractive to sleep center operators and owners who may not want to be acquired by us, but who are looking to grow their business and referral networks by offering a highly differentiated treatment package to OSA patients. Our M&A team continues to field calls and inquiries from both acquisition and affiliation prospects around the country. We are currently in negotiations with several potential candidates in various key markets, with one potential acquisition currently under an exclusive letter of intent. Given our experience with SCN, we believe these opportunities should be similarly accretive. In summary, we believe this initial success at SCN is a strong indication of the potential and upside of our new model. As we roll forward, we expect to continue to modify and refine the model to make it even more efficient and with potential for even better gross margins. Furthermore, we expect that this model, including both acquisitions and affiliations, is highly replicable and scalable across multiple markets. It looks to be highly accretive to top-line revenue growth as well as bottom-line profitability. We believe that this methodical effort patiently executed over time, has put Vivos in a much better position to realize the full potential of our technological advantages and industry-leading products and services. And that concludes our prepared remarks. Now we'll be happy to take questions.