Robert Sassoon

Robert Sassoon from Water Tower Research asked how investors should perceive Vivos under its new business model with rising revenues, both currently and in the next six months, and sought clarification on the differences in revenue recognition across Vivos' various business models.

Answer

Chairman and CEO Kirk Huntsman described the new model as an "inflection point" for the company, emphasizing its replicability, scalability, and potential for extraordinary growth and profitability. He advised investors to monitor new affiliations and progress with medical specialty groups as key indicators. CFO Brad Amman detailed that for acquisitions like SCN, revenue includes product sales at shipment and OSA diagnostic/treatment services. For contractual alliances, Vivos recognizes revenue from appliance sales as principal, with fees or profit-sharing arrangements with affiliates.

Robert Sassoon from Water Tower Research asked how investors should perceive Vivos under its new business model with rising revenues, both currently and in the next six months, and sought clarification on revenue recognition differences across Vivos' various business models.

Answer

Kirk Huntsman (Chairman and CEO) expressed strong enthusiasm for the new, replicable, and scalable business model, highlighting its potential for extraordinary growth, profitability, and expansion through new affiliations and partnerships with medical specialty groups. Brad Amman (CFO) clarified that for acquisitions like SCN, revenue captures product shipments and OSA diagnostic/treatment services, while contractual alliances capture appliance sales as principal, with fees or profit splits with affiliates.

Asked about the recruitment process for SO teams, the strategy for future acquisitions versus integrating the current one, management's prior experience with similar operational models, plans for refinancing debt, and the expected timing for reaching cash flow breakeven.

Answer

Management stated that recruiting for SO teams is robust and they can be trained quickly. The company will pursue new acquisitions while simultaneously integrating SCN, leveraging their experienced operations team. The management team has deep experience with a similar model from the dental service organization (DSO) industry. They are actively seeking to lower their cost of capital as the business model matures. The company hopes to achieve cash flow positivity sometime in Q4 2025.

Robert Sassoon from Water Tower Research LLC questioned the characteristics of the 17% of patients in the Inovasarm group who still experienced functional decline, the potential for Inovasarm as a monotherapy for non-obese sarcopenia, and the estimated capital required for the Phase III trial.

Answer

Chairman, President & CEO, Mitchell Steiner, suggested the 17% functional decline might be due to the 16-week study duration or lower baseline muscle mass. He confirmed that while the initial focus is on combination therapy, monotherapy for conditions like frailty is a potential future path. Regarding funding, he stated it was premature to give a precise figure before FDA feedback but offered a preliminary estimate of around $40 million for a 400-patient trial over 18 months.

Robert Sassoon of RAM Capital inquired about the specific impacts of the unfavorable macroeconomic environment, the drivers for gross margin improvement, the methods used to achieve significant operating expense reductions, and the sustainability of the company's first-ever annual operating profit and positive cash flow.

Answer

CEO Junling Liu explained that despite macro headwinds, the company achieved profitability through strategic execution, innovative business models like franchised warehouses, and AI-driven efficiencies. He detailed that gross margin improved by optimizing the product mix, outsourcing low-margin products, and developing service revenue streams. Liu attributed the sharp drop in operating expenses to staffing optimization, granular cost management across fulfillment and G&A, and a fully digitized operational platform. CFO Yang Chen added that the profitability is sustainable, citing well-managed working capital, highly efficient inventory and accounts receivable cycles, and a solid foundation for continued scale and efficiency improvements in 2025.

Asked for an assessment of the company's Q3 performance given the market environment, the outlook for the coming quarters, progress in digital and IT capabilities, and expansion plans for product offerings and partnerships.

Answer

The company is proud of its Q3 performance amid a challenging macro environment and is optimistic about the long-term due to demographics and the need for efficiency. Digital progress in Q3 includes using the JBP Platform and inventory sharing technology to add thousands of new SKUs and developing a highly accurate AI model for herbal medicine recognition. Expansion plans focus on leveraging the JBP model with distribution partners to rapidly expand product selection, supported by new franchise and joint venture fulfillment centers.

Asked about plans for new fulfillment centers in H2 2024, updates on new partnerships with pharmaceutical companies, and progress in digital technology, particularly the application of AI.

Answer

The company is expanding its fulfillment network via a JV and franchise model, with 7 new centers opening soon and more in the pipeline. For partnerships, they have over 400 direct sourcing relationships and are launching a digital marketing ecosystem called 'Telescope' to provide partners with data visualization. Technologically, they have improved their merchant bidding system (increasing conversion to 32%), optimized supply chain algorithms (cutting picking costs by 15%), and used AI to create databases for medical devices and supplements, doubling the product matching rate.

Inquired about the breakdown of revenue growth between domestic and international markets, the current revenue mix, the potential for that mix to shift, and the timeline for reaching EBITDA breakeven.

Answer

Revenue growth was similar across domestic and international markets. The current revenue mix is approximately 80% U.S. and 20% international. This ratio may shift slightly towards international, but the company is monitoring potential tariff impacts. Reaching the $50 million revenue run rate for breakeven in the current year is considered aggressive and unlikely. The company has minimal cost exposure to potential inbound tariffs.