Lucas Ward

Lucas Ward from Ascendiant Capital Markets inquired about Vivos' sales modeling and growth potential for the upcoming quarters, the expected trajectory of operating expenses, and an update on the company's cash flow break-even goals.

Answer

Chairman and CEO Kirk Huntsman indicated that Vivos anticipates continued dramatic top-line revenue growth, driven by the deployment of new dental providers and nurse practitioners, with a 3-6 month ramp to reach optimal revenue levels. He clarified that SAMHSA operations are projected to achieve 50-60% contribution margins at steady-state, explaining that current higher expenses are due to upfront personnel investments. Huntsman affirmed that achieving cash flow break-even is a primary goal, directly linked to the profitability of SAMHSA centers and the expansion through affiliations and acquisitions.

Lucas Ward from Ascendiant Capital Markets inquired about Vivos' sales modeling and growth potential for upcoming quarters following the SCN acquisition, along with expectations for operating expenses and the company's cash flow break-even timeline.

Answer

Kirk Huntsman (Chairman and CEO) stated that top-line revenues are expected to continue dramatic growth, driven by the deployment of new dental providers and nurse practitioners, with a 3-6 month ramp to optimal revenue levels. He projected steady-state SAMC operations to yield 50-60% contribution margins. Huntsman also affirmed that achieving cash flow break-even is a primary goal, with accretive profits from SAMC centers eventually leading to this milestone, though he refrained from giving an exact timeline.

Asked for details on the financial impact of the SCN acquisition, including its effect on the P&L, the timing of accretion, future operating expenses, and the valuation methodology for the $9 million purchase price.

Answer

The SCN acquisition is expected to be accretive in Q3 2025. While operating expenses will temporarily increase to support the integration, the significant revenue increase from direct-to-patient sales is projected to quickly outpace costs and lead to positive cash flow. The $9 million valuation was based on SCN's existing profitability, high patient volume in a concentrated market, and a deal structure ($6M cash, $3M stock with incentives) designed to align interests and ensure a smooth transition.

Asked for clarification on the number of active sleep centers, the expansion timeline, the business model for the new strategy, the revenue outlook, the status of other channels like DMEs and DSOs, and the potential revenue impact of new CPT codes.

Answer

The company is active in one sleep center location, with two more opening soon. The new business model is an MSO structure where Vivos manages the clinic, leading to higher margins. Q4 revenue is expected to be flat to slightly up, with significant growth anticipated in 2025. DME and DSO channels are now de-emphasized. The revenue impact of new CPT codes is not yet quantifiable as reimbursement rates still need to be negotiated with payers.

Asked about the reasons for the significant reduction in product discounts and sales commissions, and inquired about the future steady state of operating expenses.

Answer

Kirk Huntsman explained that lower discounts were a conscious policy change to reflect the product's value. The drop in sales commissions resulted from a deliberate restructuring of the sales force and compensation. He stated that operating expenses are not at a steady state due to the business model pivot, with simultaneous cost-cutting and hiring for growth, and more clarity will be available in the future.

The analyst inquired about the status of the order pipeline since the last call and the expected sales trends for the third and fourth quarters of the year.

Answer

Executives confirmed that the order pipeline is continuously improving, which supports the growth guidance for Q2. They stated that the growth is broad-based across all segments and this trend is expected to continue into Q3 and Q4, potentially supplemented by one or two large projects.

Inquired about the order pipeline tracking, revenue recognition for pilot projects, the scale difference between pilot and commercial systems, and whether system values are increasing in new markets. Also asked for specifics on the company's role in the lithium brine production process, and whether microplastic removal and WinDG dual-fuel engines represent new markets.

Answer

The company explained that pipeline tracking varies by business area. Revenue from pilots is booked as either a sale or rental. The value of systems in new markets like oil & gas and lithium is significantly higher. The company confirmed it is part of the production process for lithium brine, enhancing downstream ion exchange. They also confirmed that both microplastic removal and the WinDG dual-fuel engine applications are new and promising markets, with the latter being driven by engine efficiency needs rather than regulation.