Good day, everyone, and welcome to the Vivos Therapeutics First Quarter 2024 Earnings Conference Call. 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 Amman, Chief Financial Officer. Today, we'll review the highlights and financial results for the first quarter of 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 words and similar expressions are intended to identify forward-looking statements. These statements involve significant known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant risks, uncertainties and contingencies, many of which are beyond the company's control. Actual results, including, without limitation, the results 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 Vivos filings with the Securities 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(k) 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 Amman, 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 3-month period ended March 31, 2024, 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 as Julie mentioned, vivos.com/investor-relations. Today, we report first quarter of 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 was 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 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 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 quarter 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 was 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 interests 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 dependent 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 was $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 1.5 years 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, $1.6 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 a $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 has 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, in the first quarter of 2023, Vivos recognized approximately $6.5 million as 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, 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 burn from operations for the quarter ended March 31, 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 in fair value warrant liability of $10.2 million, offset by day 1 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 31, 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 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 the first quarter of 2025.

Thank you, everyone, for joining us today. In my remarks, I aim to discuss our advancements on ongoing initiatives at Vivos and share my view on the strategic opportunities ahead that we anticipate will significantly affect our revenue and growth. Following that, we will address your questions. Our main goal at Vivos over the past few years has been to achieve positive cash flow as quickly as possible through a dual approach of boosting top-line revenue while implementing phased expense reductions. Our cost-cutting efforts have been strategic, consistent, and deliberate over the past seven quarters, ensuring that we do not compromise our revenue generation. These cost reductions will continue as we adjust our business and move forward with our plans. On the revenue side, our previous initiatives have included a focus on large and small dental service organizations, signing distribution agreements with medical equipment companies like Lincare, enhancing and diversifying our product lines, publishing peer-reviewed research, expanding insurance coverage for Vivos products, achieving key regulatory approvals, refining our Treatment Navigator Program, and launching programs for our trained dentists. While we are making progress in these areas, none have yet delivered the substantial revenue growth we need at this time. However, we see significant long-term potential in these initiatives and expect to see revenue increases as they mature. Management is aware that we need to create substantial and immediate cash flow to reduce our monthly expenditures. Therefore, we are pursuing several important partnerships that will allow Vivos to directly engage with a larger number of patients who are likely to seek our treatments. This includes leveraging our operational strengths to successfully manage new cases of obstructive sleep apnea, tapping into greater profit margins for each new case start, expanding our clinical services for pediatric patients, and enhancing our reach in the market. We aim to achieve positive cash flow by the end of 2024 or early 2025. We have already started initial integration activities with our first target partnership, which we expect to finalize soon, and are in advanced discussions with other potential partners. While we cannot provide specific names or details just yet, we anticipate making a formal announcement shortly. With this new operational model focusing on collaborations with medical and sleep testing communities, Vivos will become less reliant on dentistry alone, allowing us to enhance the patient experience and create more value. This approach is designed to minimize capital expenditure as it focuses on collaborative success. Management has invested significant time working with experts to evaluate all aspects of this venture, leading to a comprehensive and potentially highly profitable model that has not been seen in sleep medicine before. We believe this position gives Vivos a significant competitive advantage in the market, thanks especially to management's experience in operating multi-market dental support organizations. It’s essential to emphasize our commitment to patient care and achieving optimal health outcomes. We firmly believe Vivos oral medical devices will become a new standard for treating sleep disorders like obstructive sleep apnea, creating unprecedented health and wellness benefits. We have completed extensive research establishing the safety and efficacy of our technology, secured crucial regulatory approvals, built provider networks, and established protocols for the best patient outcomes. What remains is to monetize this foundation and realize the financial potential that lies ahead. Our team is ready for this challenge, and we look forward to sharing more updates and reporting our progress in the coming quarters. That concludes my prepared remarks. We are now open to your questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from the line of Lucas Ward from Ascendiant Capital Markets.

Thank you, operator, and good afternoon, gentlemen. Congratulations on your hard work and your business progress.

Thank you, Lucas.

Thank you.

So regarding the new channel relationships that you're talking about, I mean, obviously, we've heard about the DMEs, the DSOs, can you expound on the nature of these relationships, like what type of entity are we talking about? And how would it be different from the distribution agreements that you've already talked about?

Yes, that's a great question, and I’ll do my best to provide an answer based on what I can share today. The nature of the organizations we're targeting will vary somewhat; they could be large medical groups, hospitals, sleep testing centers, or various affiliated groups. For example, we are currently exploring a potential relationship with a large ENT group in California and working with some sleep testing groups. All these organizations have one thing in common: they deal with patients who are experiencing CPAP failure or patients who have just been diagnosed with obstructive sleep apnea and are looking for treatment options. In the current insurance-driven healthcare environment, many obstructive sleep apnea patients are simply issued a CPAP device without much education about their condition or treatment alternatives. This approach, often referred to humorously as the slap and pat model, leaves patients feeling overwhelmed and inadequately informed about their options, and many do not truly want to use the CPAP device, yet are unaware of alternatives. Our new model will present a comprehensive array of treatment options, including CPAP and our entire line of oral appliance therapy. From our experience, when these patients are informed about all available options and supported by their sleep specialists or primary care doctors, they typically choose to pursue treatment actively. Most often, they opt for the Vivos CARE treatment option, even if it requires higher out-of-pocket costs and isn’t fully covered by insurance, in about 90% of cases. We have been testing our systems, protocols, and processes, and we are confident that when our teams engage with larger numbers of patients, we will successfully close those cases and receive payment. The key difference now is that we will be generating revenue from a much broader segment of patients and achieving profit margins that have traditionally only been realized by independent practitioners. These professionals will be medical doctors and dentists focusing exclusively on obstructive sleep apnea. The reason this is transformative is that these patients are already present and in immediate need of treatment. We are partnering with firms currently directing these patients and suggesting they redirect them to us for comprehensive education and resources to support informed decision-making. Whether patients choose CPAP, mandibular advancement oral appliances, or Vivos, we anticipate greatly benefiting from these relationships. That’s a lot of information, but that’s where we’re headed.

Okay, Kirk. So if I hear you correctly, it sounds like the big difference with these new partners is that they already have live patients. They're dealing with the end customer.

Exactly.

I guess a follow-up question...

I don't have any...

Yes. Yes, go ahead. Go ahead. So a follow-up would be like what do you need to do to execute those opportunities? I mean, how resource-intensive is it for you to be able to actually serve these partners and their patients?

We have trained teams that are gaining experience working with patients across the country. We operate from coast to coast in the United States and are highly knowledgeable about our methodologies and systems. We understand how to close cases and get patients into treatment. For instance, consider a sleep testing company that conducts home sleep tests for patients and receives about $200 per test, which they might net around $100 after covering their expenses. The sleep physician interpreting the test earns around $50. In contrast, dentists typically earn between $5,000 to $8,000 on a case, highlighting the significant earnings disparity between dentists and the medical community, including the testing company. By integrating the testing company into our MSO network, we can adjust their compensation structure, allowing them to potentially earn much more than before. This provides a strong incentive for collaboration, ensuring patients have access to the best treatment options available. Based on our experience, we believe more patients will choose the treatments we offer.

If I could ask one more follow-up, you've made two significant announcements. One is that your CARE devices are approved by the FDA for treating severe sleep apnea, and the other is that these devices are eligible for Medicare reimbursement. My question is, while this sounds great, how do you monetize it? How does this affect your business model, revenue opportunities, and sales and marketing?

Thank you for that, Lucas. The first point to consider is the credibility that comes with having the only FDA-cleared oral appliance device to treat severe sleep apnea. About 20% of all sleep apnea cases are classified as severe, but the severe population accounts for around 80% of the comorbidities and serious conditions caused by obstructive sleep apnea. Our ability to treat these severe cases cost-effectively is attracting significant attention from medical providers and the healthcare community. This has raised Vivos' stature and credibility to new heights. The discussions with medical providers across the country initiated by this clearance are unprecedented compared to a year or two ago, and we're noticing more medical doctors becoming comfortable with recommending our therapy. This increase in recommendations is leading to more patients seeking the therapy, enhancing their confidence in the technology, and opening new avenues for collaboration with the medical community that have not existed before. Historically, dentistry has functioned in isolation, often facing some resentment from the medical community. However, with our clearance, we quickly observed the medical community's curiosity about the technology and its benefits. This trend is gaining momentum as we move forward. While this process takes time and is not instantaneous, on the Medicare front, we now have additional financial support options for patients who need help with payment. Medicare patients now benefit from this extra assistance in funding their treatment.

Thank you very much.

You bet.

And speakers, there are no further questions at this time. I would like to hand over the call to Kirk Huntsman, Chairman and Chief Executive Officer. Please continue.

Thank you for joining us on today's call and for your ongoing interest and support of Vivos Therapeutics. We recognize this has been a long journey. Despite the challenges and obstacles we've faced, we feel more optimistic about our future and the growth opportunities for this company. We look forward to updating you on our progress as we implement our plans announced for 2024 and beyond. Thank you all, and have a great evening.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.