Vivos Therapeutics, Inc. (NASDAQ:VVOS) Q2 and Q3 2022 Earnings Convention Name December 20, 2022 5:00 PM ET
Firm Contributors
Julie Gannon – Chief of Workers and Investor Relations
Kirk Huntsman – Chairman and Chief Government Officer
Brad Amman – Chief Monetary Officer
Convention Name Contributors
Scott Henry – ROTH Capital
Alexander Nowak – Craig-Hallum Capital Group
Operator
Good day, everybody and welcome to the Vivos Therapeutics Second and Third Quarter 2022 Earnings Convention Name. At the moment members are in a listen-only mode. A matter-and-answer session will observe administration’s remarks. This convention name is being recorded and a replay of at the moment’s name shall be out there on the Investor Relations part of Vivos’ web site and can stay posted there for the subsequent 30 days.
I’ll now hand the decision over to Julie Gannon, Vivos’ Investor Relations Officer for introductions and the studying of the Secure Harbor assertion. Please go forward.
Julie Gannon
Thanks, operator. Hi there everybody. And welcome to Vivos’ Therapeutics second and third quarter 2022 earnings convention name. A duplicate of our earnings press launch is obtainable on the Investor Relations part of our web site at www.vivos.com.
With us on at the moment’s name are Kirk Huntsman, Vivos’ Chairman and Chief Government Officer; and Brad Amman, Chief Monetary Officer. Right now we’ll overview the highlights and monetary outcomes for the second and third quarter of 2022, in addition to newer developments and Vivos’ plans for 2023. Following these formal remarks, we shall be ready to reply your questions.
I might additionally wish to remind everybody that at the moment’s name will comprise sure forward-looking statements from our administration made inside the which means of Part 27A of the Securities Act of 1933 as amended, and Part 21E of the Securities and Alternate Act of 1934 as amended, regarding future occasions. Phrases equivalent to intention, might, might, ought to, venture, count on, intends, plans, believes, anticipates, hopes, estimates and variations of such phrases and related expressions are supposed to establish forward-looking statements. These statements contain identified and unknown dangers and are primarily based upon quite a few assumptions and estimates that are inherently topic to important threat, uncertainties and contingencies, lots of that are past the corporate’s management.
Precise outcomes, together with with out limitation the outcomes of Vivos progress methods, operational plans, together with value financial savings plans and plans to generate income, future potential outcomes of operations or working metrics, and different issues to be addressed by Vivos administration on this convention name, might differ materially and adversely from these expressed or implied by such forward-looking statements.
Elements that would trigger precise outcomes to vary materially embody, however aren’t restricted to the danger elements described in different disclosures contained in Vivos filings with the Securities and Alternate Fee, together with the danger elements and different discloses in our Type 10-Okay for the 12 months ended December 31, 2021 and our first, second and third quarter 2022 Type 10-Q, all of that are accessible on the Investor Relations part of the Vivos web site, in addition to the SECs web site.
Besides to the extent required by regulation, Vivos assumes no obligation to replace these statements as circumstances change. Lastly please bear in mind that the U.S. Meals and Drug Administration has given sure Vivos home equipment 510(ok) clearance to deal with delicate to reasonable OSA. Any reference herein concerning Vivos Therapy or the Vivos Methodology must be seen in that context. Therapy of sufferers with extreme OSA are carried out off label on the soul discretion of the treating physician and aren’t a part of the Vivos therapy protocol.
Now, presently it’s my pleasure to introduce Kirk Huntsman, Chairman and CEO of Vivos. Kirk, please go forward.
Kirk Huntsman
Thanks, Julie. Earlier than we start, I need to thanks all for becoming a member of us at the moment and in your persistence as we have labored by way of the income recognition overview that delayed the filings of our second and third quarter monetary outcomes. Given the character of that course of, we have been sadly restricted in what we have been capable of say publicly, which was as irritating for us as I am positive it was for — have been most of you. Nevertheless, we will now report that the upshot of our ASC 606 overview is that our prior and present outcomes of operations have solely minimally been impacted. No income was misplaced, and we’ll now be recognizing income, notably VIP enrollment income over a barely longer time frame. Moreover, we consider that our controls and procedures shall be stronger for having gone by way of this course of.
In a second, I will flip the decision over to our Chief Monetary Officer, Brad Amman, who will spend a while speaking a bit extra about this and strolling you thru the highlights of our monetary outcomes for the second and third quarters. After that, my purpose at the moment is to inform you about among the thrilling issues which are taking place at Vivos and to debate the steps we have been taking so as to guarantee our firm’s persevering with improvement, and most of all, to provide everybody on at the moment’s name some extra perception as to why we’re so optimistic about our future. Then we’ll be joyful to take your questions. After we’re completed, I hope you will all go away at the moment’s name with a greater sense of why we consider Vivos is succeeding far past what’s presently being acknowledged by our valuation within the capital markets and why this firm has a really brilliant future with the potential to guide the marketplace for sleep apnea therapy.
Now let me flip it over to Brad to overview our financials. Brad, please go forward.
Brad Amman
Thanks, Kirk and good afternoon everybody. Right now, I will overview the monetary highlights of our second and third quarter 2022 monetary outcomes. For info on our outcomes for the six months ended June thirtieth, 2022 and 9 months ended September thirtieth, 2022, I will refer you to our earnings launch which was distributed earlier at the moment and our 10-Q experiences, which shall be out there on the SEC filings portion of the investor relations part of the Vivos web site at vivos.com/investor-relations.
Right now, we reported second quarter 2022 complete income of $4.2 million in comparison with $4.5 million for the second quarter of 2021. This year-over-year lower was because of decrease income from VIP enrollments associated to the lingering results of COVID-19 variant resurgences in addition to typical second quarter seasonality within the dental business, which was offset to a substantial diploma by elevated equipment income we generated in the course of the quarter.
Throughout the second quarter of 2022, we enrolled 58 VIPs and acknowledged income of roughly $1.2 million in comparison with 73 VIP enrollments for income of $2.4 million throughout the identical interval final 12 months. 12 months-over-year enrollments have been impacted by COVID-19 variant resurgences that started towards the tip of 2021. These resurgences introduced challenges for dentists’ workplaces, which have been working at decrease capability and with restricted employees with these hurdles persisting all through the second quarter of 2022. We started to see this impression subside in the course of the month of June.
Additionally, because it pertains to the ASC Matter 606 income recognition protocols, we reevaluated our present income recognition coverage for VIP enrollments, and together with our impartial audit committee, decided that our present income recognition coverage was not in step with the steerage in ASC 606. After analyzing our VIP contracts utilizing the five-step means of ASC 606, we decided that for VIP enrollment contracts, we have been required to individually establish the efficiency obligations and acknowledge the income because the efficiency obligations are happy or over the client life as relevant. We now consider every contract individually for relevant elements in assembly the definition of a contract below ASC Matter 606.
As Kirk talked about, nonetheless, it is extremely necessary to notice that the precise impression on our firm and our outcomes of operations, each previous and going ahead, is comparatively restricted, together with that no prior audited monetary statements required a restatement.
Throughout the second quarter of 2022, equipment income rose 28% because of the value and quantity will increase as Vivos offered 3,321 complete oral equipment arches for a complete of roughly $2.1 million in comparison with 3,082 oral equipment arches in the course of the second quarter of 2021 for a complete of roughly $1.6 million. And for the second quarter of 2022, we had roughly $200,000 incentive income in comparison with $100,000 for the second quarter of final 12 months and roughly $200,000 in our orofacial myofunctional remedy income in comparison with just about none within the prior 12 months because of the introduction of these orofacial myofunctional remedy companies late within the first quarter of 2021.
Gross income was $2.6 million for the second quarter of 2022 in comparison with gross revenue of roughly $3.6 million for the comparable interval in 2021. Gross margin for the second quarter of 2022 was 62% in comparison with 81% throughout final 12 months’s second quarter, primarily pushed by increased prices related to home equipment because of enhance in value of uncooked supplies and VIP enrollments from new incentives deployed to extend VIP enrollments.
As we talked about on prior earnings calls, we proceed to refine our gross sales, advertising and marketing and promotional efforts with potential VIPs not solely to extend income, however to enhance our gross revenue and margins. This contains our expanded social media and digital advertising and marketing efforts that Kirk will speak about in additional element in a while.
Gross sales and advertising and marketing expense was $1.7 million for the second quarter of 2022 in comparison with $1.4 million for the second quarter of 2021. The rise was primarily because of new advertising and marketing campaigns, updating advertising and marketing supplies for buyers and customers and enhancements to the Vivos web site, offset by a lower in gross sales commissions associated to decrease VIP enrollments.
Common and administrative bills have been roughly $7.7 million for the second quarter of 2022 in comparison with $6.1 million for the three months ended June 30, 2021. The year-over-year enhance was primarily because of increased headcount and bills related to being a public firm in addition to elevated journey and occasion bills associated to enhancing circumstances with respect to COVID-19.
Web loss was roughly $7 million for the second quarter of 2022 in comparison with roughly $4 million for the second quarter 2021. The year-over-year enhance was primarily from increased G&A and gross sales and advertising and marketing expense because of the elements I simply mentioned.
Turning to our third quarter outcomes, we reported complete income of 4.4 — $4.2 million in comparison with $4.5 million for the third quarter of 2021. The year-over-year lower was because of decrease income from VIP enrollments in addition to decrease administration income from the MID clinics, Medical Integration Division clinics, which have been offset by elevated equipment income that we mentioned earlier — that we acknowledged earlier within the quarter.
Throughout the third quarter of 2022, we enrolled 56 VIPs and acknowledged income of roughly $1.6 million in comparison with 56 VIP enrollments for income of roughly $2.3 million throughout the identical interval final 12 months. Word that the distinction in income with the identical variety of VIPs enrolled is attributable to our new income recognition coverage, which has the online impact of pushing some VIP enrollment income out over a considerably bigger and longer time frame. 12 months-over-year enrollments have been impacted by COVID-19 variant resurgences I discussed earlier, in addition to the change in our income recognition methodology that we adopted throughout 2022.
Throughout the third quarter of 2022, equipment income rose 20% because of quantity will increase as Vivos offered 3,057 complete oral equipment arches for a complete of roughly $1.9 million in comparison with 2,996 equipment arches in the course of the third quarter of 2021 for a complete of roughly $1.6 million. And for the third quarter of 2022, we had roughly $100,000 incentive income, in step with what we reported within the third quarter of final 12 months, and roughly 400 in our orofacial myofunctional remedy income in comparison with $200,000 within the third quarter of 2021 as these companies have been launched in the course of the first quarter of 2021.
Gross revenue was $2.5 million for the third quarter of 2022 in comparison with gross revenue of $3.2 million for the comparable interval in 2021. Gross margin was 59% for the third quarter of 2022 in comparison with 70% throughout final 12 months’s third quarter, reflecting increased prices related to home equipment and VIP enrollments and an extended interval over which we’re recognizing enrollment income.
Gross sales and advertising and marketing expense decreased by $900,000 to $1.1 million for the third quarter of 2022 in comparison with $2 million for the third quarter of 2021. This lower is because of roughly $600,000 discount in digital campaigns and roughly $700,000 lower in supplies and product samples, offset considerably by bills associated to enhancing the Vivos web site, elevated gross sales commissions and extra print media advertising and marketing and advertising and marketing provides.
Common and administrative bills have been roughly $6.6 million for the third quarter of 2022 in comparison with $6.5 million for the third quarter of 2021. The slight year-over-year enhance was primarily because of the progress of the corporate, mixed with increased headcount and bills related to being a public firm, in addition to elevated journey and occasion bills associated to enhancing circumstances with respect to COVID-19. Web loss was roughly $5.4 million for the third quarter of 2022, comparatively flat in comparison with the third quarter of 2021. The year-over-year flatness was because of the elements I simply mentioned.
Now turning to our stability sheet and assertion of money flows. Money burn from operations for the 9 months ended September 30, 2022 elevated roughly $5 million over the 9 months ended September 30, 2021. This enhance is due primarily to the rise in our internet loss in the course of the interval, a rise of roughly $900,000 in accounts payable and accrued bills from consulting, authorized and third-party lab charges related to the elevated manufacturing of our Vivos home equipment, a rise of roughly $0.5 million in pay as you go bills, offset by a lower of roughly $200,000 in accounts receivable and the return of about $0.5 million in a tenant enchancment allowance associated to the buildout of our Vivos Institute coaching facility right here in Denver.
For the 9 months ended September 30, 2022, internet money utilized in investing actions consisted of capital expenditures for software program of about $700,000 associated to the event of software program for inside use, which is anticipated to be positioned in service in 2023.
As of September 30, 2022, the corporate had roughly $6.7 million of money and money equivalents, which might not be adequate to fund the operations and strategic goals of the corporate over the subsequent 12 months. Accordingly, the corporate has been exploring choices for appropriate further financing that can replenish our capital sources and assist drive our enterprise in 2023. With further financing in addition to further value financial savings measures we now have carried out in the course of the second half of 2022 to deal with our money burn, we proceed to anticipate having adequate monetary sources to fulfill our capital necessities, fund operations and proceed executing on our progress technique.
Additional, on account of value financial savings initiatives, we count on to realize everlasting SG&A expense reductions on a go-forward foundation. Moreover, we work to extend our revenues, which Kirk will converse to in additional element momentarily. We additionally proceed to discover various kinds of financing methods to assist progress and lengthen our money runway, together with different debt financings given our latest inventory value efficiency.
In abstract, we’re inspired by latest momentum we have seen in our enterprise that Kirk will speak about shortly in addition to elevated contribution from newer income streams equivalent to our strategic collaboration with Nexus.
That concludes the monetary overview. Now, I will flip the decision again over to Kirk to share some latest updates and speak about long-term progress prospects.
Kirk Huntsman
Thanks, Brad. Right now marks the tip of an extended and arduous journey over the previous six months. As nearly all of you realize and are keenly conscious, the online results of our not too long ago accomplished income recognition overview was basically a primary quarter income adjustment of lower than $200,000 in our favor. That is it. No restatement of prior years, no findings of managerial misconduct, no revelations of wrongdoing. Only a minor income adjustment and a brand new formulation for pushing the popularity of a portion of income additional out into the long run.
So, let me be clear about this with out going into all the main points. With a purpose to fulfill sure extremely technical provisions of an accounting commonplace that even the specialists themselves could not all the time agree upon and which require administration to make sure extremely subjective estimates, in the long run, we spent six lengthy months and important monetary and time sources solely to finish up just about the place we started.
Whereas we’re grateful that the end result was a comparatively minor adjustment and that our insurance policies and procedures have been improved, which is able to serve us properly going ahead, it’s chilly consolation seen in opposition to the time, sources and capital markets credibility, which we misplaced alongside the best way. Having stated all that, this lengthy and arduous course of is now behind us. We don’t count on to have any additional points associated to this matter. So if nothing else, that’s trigger for celebration.
Now let me briefly overview why we consider our core proprietary know-how and companies platform will proceed to disrupt and finally dominate the worldwide marketplace for respiration and sleep issues equivalent to obstructive sleep apnea, or OSA. There may be broad acceptance of the final word potential to deal with OSA globally. Conservative estimates place out there at over 1 billion OSA victims worldwide or about one out of each eight individuals. Satirically, as diagnostic applied sciences enhance and change into extra ubiquitous, these estimates proceed to rise. In our personal quite intensive sleep testing right here within the U.S. and Canada, we see almost one out of two of all sufferers testing constructive for the situation.
Right now, an estimated 90% of OSA sufferers are prescribed CPAP because the medical gold commonplace therapy. When used, it may work properly, however nobody desires to make use of it each night time for the remainder of their lives. And most sufferers finally cease utilizing it after a number of months. For sufferers who’re CPAP illiberal or non-compliant, the subsequent step choices are much more restricted and fewer interesting. So, there will be little question that for whoever places ahead a clinically efficient product or therapy answer at a pretty value level that sufferers really need, the payday might be substantial.
Briefly, we now have that very factor right here at the moment at Vivos. Our services meet all the important thing standards. They work. They’re value efficient. And when sufferers are given all of the choices, we discover they’re most well-liked over various remedies.
Prior to now, we’ve not been capable of show that to the satisfaction of some. However simply this 12 months, we have moved past small or restricted research revealed in low impression journals to bigger research in high tier medical journals equivalent to sleep medication the place statistically important outcomes have been achieved.
Prior to now 12 months, Vivos additionally introduced authentic analysis on our flagship CARE, C A R E, oral equipment gadgets on the high three tutorial sleep medication conferences on this planet, the World Sleep Congress by the World Sleep Society, SLEEP 2022 by the American Academy of Sleep Drugs and SLEEP Europe 2022 by the European Sleep Analysis Society in addition to on the Higher New York Dental Assembly. At these conferences, Vivos introduced two database opinions, demonstrating important advantages of care machine utilized in treating grownup OSA. And concerning use within the administration of pediatric OSA and selling wholesome nasal inhaling youngsters. We additionally introduced a few of our newest knowledge concerning the usage of our CARE gadgets within the therapy of grownup complications.
Seven further papers with equally supporting knowledge exhibiting statistically important outcomes have both been revealed or submitted and are pending publication in different peer reviewed journals. Vivos created and has begun enrollment in a tutorial built-in supplier program, offering entry to tutorial researchers to check Vivos’ proprietary merchandise in an open supply format. Vivos has additionally continued its aggressive pursuit of scientific trials, and several other potential groups and websites have been recognized and are within the planning phases.
One noteworthy and really sensible software that has come about by way of our analysis and ongoing improvement has been the introduction of a key diagnostic know-how referred to as rhinomanometry. You could recall that Vivos is the unique dental market distributor in the US and Canada for the one FDA cleared rhinomanometer out there. So we now have extremely differentiated merchandise and applied sciences that truly work and have been working for over a decade in over 31,000 sufferers.
We have now broad out-of-network insurance coverage protection for medical payers as properly. What we’ve not had is a therapeutic product line that would tackle the wants of sufferers at lower cost factors. To deal with that want, we not too long ago introduced a number of thrilling new additions to our product line and companies to permit way more sufferers to obtain therapy by way of our supplier community. These new merchandise enable us entry into a number of new product and tools classes the place we have by no means earlier than had a presence. We now have a broader vary of value level choices which are being rolled out that considerably decreases the friction per affected person and makes it simpler for dentists to get sufferers into the Vivos ecosystem and that stimulates our progress.
With product strains now starting from diagnostics to CPAP, to mandibular development and therapy with all of the gadgets and the Vivos Methodology, we now have a product and path for therapy for the overwhelming majority of sufferers.
We regularly hear the query, if Vivos therapy is so nice, why have not many extra dentists built-in Vivos into their apply? That is an important query. We regularly ask ourselves the identical. So, it is necessary to notice that our Vivos built-in apply or VIP enrollment efforts thus far have been centered on attracting solely the perfect dentists out there, those that had the scientific confidence and success to undertake and combine one thing like Vivos into their apply. They’re sometimes those who get the general image of what this will imply for his or her apply and their sufferers and who see the worth in our preliminary coaching and enrollment charges that may be as excessive as $50,000.
Now that we have established a broad core community of over 1,650 Vivos skilled dentists throughout North America, we will now start bringing in additional dentists at decrease introductory costs for restricted packages that can entice many extra docs and permit them to check the waters with our firm and our merchandise. As a direct results of creating many extra decrease value factors of entry, in 2023 we count on to see extra dentists than ever earlier than turning into prospects of Vivos and buying services.
Have in mind additionally that Vivos continues to be comparatively new to dentistry. We’re roughly the place aligned know-how was of their early days as they rolled out Invisalign. And recall that their inventory likewise dropped almost 90% from their IPO value earlier than rebounding and finally peaking out at over $600 a share.
Adoption of any new medical know-how takes time and perseverance. Encourage Medical was first spun out of Medtronic again in 2007. And whereas each firms presently get pleasure from a lot higher valuations than we now have, we consider our general market alternative, our merchandise and our know-how are superior and can in the end prevail out there. Remember the fact that necessary progress pivots for every of those firms got here once they started driving sufferers who’re asking particularly for his or her merchandise to coach suppliers.
We’re persevering with to get our title out in order that increasingly sufferers particularly ask for our merchandise. In that regard, we not too long ago efficiently piloted and rolled out a brand new program referred to as Therapy Navigator, which is already exhibiting nice promise. This program helps dental workplaces and gives every new affected person and advocate who help them in navigating the various completely different steps concerned within the affected person journey, coordinating medical and dental diagnostic appointments, insurance coverage pre-authorizations, furthering training and therapy planning and usually teaching the sufferers by way of therapy.
The Therapy Navigator’s function is successfully to behave as an extension of the VIP apply, taking a big load off the supplier’s workforce. Beneath the steerage of the suitable well being care skilled, Therapy Navigators help and inspire sufferers to acquire the appropriate therapy for them. Therapy Navigators additionally leverage the facility of our Vivos AireO2 EHR, which is digital well being document software program platform, to facilitate communication and collaboration amongst suppliers to file medical and dental insurance coverage claims and to document affected person progress all through.
You could recall that our Vivos AireO2 EHR software program program is the one full-featured medical dental apply administration system available on the market at the moment, configured particularly to accommodate the therapy of respiration and sleep issues.
Docs pay further charges to Vivos for our Therapy Navigator service. Over the course of 2023, we count on to see this program evolve into a big income and revenue supply for the corporate. At present, we now have taken over 70 functions from VIPs to affix this program, and we’re systematically rolling this program out throughout the nation.
Our preliminary outcomes from our Therapy Navigator pilot exams display that we will ship a helpful service to our VIP workplaces, fixing one in all their main problems with employees shortages and turnover. Now all they need to do is display screen sufferers coming by way of their hygiene departments after which enable the Therapy Navigator to handle the logistics and get the affected person prepared for therapy. As well as, our Therapy Navigators help sufferers who come by way of our social media web site or different advertising and marketing campaigns to search out solutions and get into the Vivos ecosystem.
Now I might like to show some consideration to our Q2 and Q3 outcomes, beginning with our two key metrics of VIP enrollments and plans to [indiscernible]. Throughout the second and third quarters of 2022, macroeconomic elements, together with heightened inflation and rising rates of interest, continued to place stress on our enterprise and the practices we serve. These elements, together with the lingering impacts of COVID, led to dentist delaying enrollment with Vivos and fewer sufferers going by way of the doorways of our VIP workplaces. This impression has not been restricted to Vivos. It has been felt all through the dental business.
Different firms within the dental business have skilled related challenges because of the financial atmosphere. For instance, Align Expertise skilled a big lower of their aligner income by 8% quarter-over-quarter throughout Q3 and down 13% over the earlier 12 months. Right here at Vivos, we noticed our equipment gross sales peak at an all-time document in June, solely to fall again considerably in Q3.
Regardless of these headwinds, we’re not happy with sustaining comparatively flat efficiency right here in 2022 and have taken important steps to get us again on the trail to progress. To that finish, we now have reorganized and downsized staffing in any respect ranges. We have now made cuts or renegotiate relationships with distributors. And each time potential, we now have turned expense line objects into new income streams. I’ll talk about these efforts in higher element right here in a second.
Digging deeper into our efficiency past the revenue assertion, there are a number of noteworthy achievements. When it comes to new supplier enrollments, we enrolled 58 and 56 new suppliers in Q2 and Q3, respectively. And whereas that is down 12% year-over-year because of the causes I simply talked about, enrollments within the second quarter elevated by 81% over the primary quarter. Additionally, whereas the overall enrollments have been comparatively flat in Q3, we now have elevated our gross sales conversion fee and count on to maintain enhancing upon this development. One think about our improved closing fee is a brand new 0 curiosity financing program for brand spanking new VIPs. The associated fee now for a professional dentist to change into a Vivos built-in supplier or VIP is now as little as $750 a month.
Furthermore, pre-registrations for the subsequent 12 months in January, February and March for our sleep medication revolution occasions are almost offered out. Having such occasions totally booked out that far is unprecedented for us and one thing we see as a good development.
Let’s transfer on for a second now to house sleep check and case begins, that are each key efficiency metrics. The VivoScore house sleep check we provide to our VIPs from SleepImage are a core benefit as a result of they provide a straightforward and inexpensive means for sufferers to acquire a clinically correct and diagnostic high quality evaluation of their respiration and sleep. VivoScore house sleep check for Q2 and Q3 of 2022 have been two occasions the speed of the identical interval in — the identical intervals in 2021. Which means hundreds of sufferers a month are discovering that they’ve some type of OSA, and we’ll want to determine what to do about it.
Our main check now could be to search out methods to help our VIPs to get these sufferers into significant dialogues about their situation and in the end shut extra circumstances and get extra of these sufferers within the therapy. That’s exactly why we put collectively our Therapy Navigator program.
MyoCorrect enrollments for Q2 and Q3 have been up two and a half occasions over the identical interval final 12 months. The sturdy progress on this program not solely gives a constant and rising income stream for the corporate, but it surely additionally helps sufferers have a greater general expertise with therapy. Total, new equipment begin — new equipment case begins are down barely from the prior 12 months. Up to now, our VIPs have handled over 31,000 sufferers with the Vivos Methodology.
Vivos continues to make glorious progress within the dental service group, or DSO channel, with energetic pilots in three DSO organizations, which symbolize over 457 practices below administration. Pilot packages are beginning with 4 further DSOs, representing a possibility of one other 519 areas. We’re in superior contract discussions with an extra 17 DSOs, representing one other 5,500 areas. That is 24 distinct DSOs and nearly 7,000 practices.
Now as lots of you realize, I used to be the founding father of one of many very first DSOs and helped to pioneer the DSO mannequin of offering enterprise and scientific assist to impartial dentists. Over this previous summer time, I used to be privileged to talk at one of many largest DSO conferences this 12 months the place I shared why Vivos is a big alternative to the DSO neighborhood. As a result of the DSO market is so necessary, I’ll spotlight this once more, additionally sharing the constructive impression to Vivos.
First, the DSO company mannequin is to amass practices, enhance EBITDA and promote at the next a number of. Second, sleep dentistry is the largest alternative to extend EBITDA since aligners and implants. Third, a typical DSO apply that screens simply two sufferers per day, 4 days per week would check 32 sufferers a month. Half of these will check constructive, and half of the constructive group ought to begin therapy, yielding high line income of slightly below $1 million per apply.
Now to know the impression of this, you need to know that the sphere of dentistry has largely change into a commodity market with little remaining alternative for brand spanking new income or margin progress. That being the case, nowhere else in all of dentistry is there a possibility to develop that even comes near what Vivos is providing.
Level quantity 4, estimated internet EBITDA margins of 30% to the DSO per apply would internet the apply $300,000 yearly. Since DSO multiples are sometimes about 10x of EBITDA, this one apply might translate to a $3 million enhance within the general DSO valuation. Now for a comparatively small 35-location DSO, the mixing of Vivos into their workflow might add $100 million to their agency valuation.
Level quantity 5. Now let us take a look at the impression to Vivos. Every DSO apply that performs to the above metrics would generate about $192,000 in annual income for this firm. Level quantity six. A second in the past, I discussed the three DSO practices that we have been in pilot check with at the moment and that they symbolize 897 complete practices below administration. If simply 20% of these practices grew to become Vivos’ suppliers, it could add roughly $34 million of Vivos — annual income to Vivos. We see no cause why that quantity could be restricted to twenty%. And given the compelling economics outlined above, we count on a lot higher penetration over time.
What’s turning into very clear from our pilot check is that the chance for Vivos with respect to DSOs is all the pieces we anticipated and even perhaps extra. When coupled with our Therapy Navigator program, the ROI for each DSOs and Vivos is unparalleled.
Now on the regulatory entrance, earlier this 12 months Vivos was cleared by way of the Canadian Ministry of Well being and Well being Canada to promote gadgets in Canada with even broader specs. And as our analysis and scientific knowledge turns into extra extensively accepted, extra regulatory doorways are opening for us.
Within the second quarter of 2022, Therapeutic Items Administration, or TGA, in Australia issued clearances for our gadgets to deal with adults and youngsters for all indications inclusive of OSA no matter severity. For these of you not aware of the TGA, it’s Australia’s equal to the U.S. Meals and Drug Administration. It is a important improvement for us. Not solely does this pave the best way in lots of worldwide markets, however this additionally gives additional validation of our know-how. We proceed to maneuver ahead looking for clearance right here within the U.S. in addition to worldwide regulatory companies. We’re optimistic that our scientific knowledge will proceed to be properly acquired and that the mandatory regulatory approvals going ahead won’t be a variant.
Talking of worldwide markets, we’re in late-stage negotiations to take our know-how into Dubai and the Center East and are within the early levels of going into India and Southeast Asia. Our penetration into the Australian market can be going properly now that we now have full regulatory approval. We word that these alternatives have come to us by means of dentists and others who’ve come to the U.S. for coaching at our institute and have now need to take this life-changing know-how again to their house international locations and areas.
So there, you may have only a glimpse of why we consider the way forward for Vivos has by no means been brighter. From the most recent analysis that continues to raise and substantiate our know-how, to our revised and streamlined new enterprise mannequin and product strains, which is able to speed up our scale as much as new and thrilling regulatory approvals in worldwide markets, we proceed to make strides and progress.
Now, clearly, we’ll want further capital to realize these goals and understand the potential I’ve simply outlined. Alongside the identical strains, our main focus all through this 12 months has been to make sure we place ourselves to realize constructive money move as quickly as potential. To perform this, we now have taken a collection of steps to streamline bills whereas additionally creating new income alternatives. Our inside constructions and course of — processes have been considerably revamped with a deal with near-term ROI.
On the associated fee slicing entrance, we disassembled the corporate and reorganized in new ways in which we consider shall be extra environment friendly and price efficient going ahead. Vendor relationships have been reassessed and/or renegotiated. What have been as soon as expense line objects have now been became income alternatives wherever potential?
The online impact of all these efforts has been a discount approaching $1 million per thirty days and our money burn from its peak within the first quarter to the place we’re at the moment. Additionally, we count on to see the impression of our new income streams progressively take form all through 2023 and contribute considerably to our profitability. As beforehand talked about, our purpose is to realize money move breakeven within the subsequent 12 to 18 months. In the meantime, we’re doing all the pieces we all know the way to be nice stewards of the capital we now have out there. And as Brad talked about, we now have been exploring further financing choices. We consider we now have a very good answer out there, and we hope to announce one thing within the close to future.
One other necessary results of the reorganizing of our enterprise from the bottom up has been a common simplification in what we do and the way we do it. Our coaching is extra streamlined and intently centered on the necessities, in order that ramp-up occasions for brand spanking new suppliers are as transient as potential. Our messaging to the world at giant is crisper and clearer. Sufferers looking for actual options are discovering us and being directed into Vivos skilled practices.
Over the previous a number of months, we now have been aggressively pursuing further capital financing choices. And as I stated, we hope to have one thing to announce on that entrance very quickly. The corporate has been actively exploring choices for appropriate further financing that can replenish our capital sources and assist drive our marketing strategy ahead in 2023.
In prior earnings calls, we highlighted our strategic pivot in direction of direct-to-consumer advertising and marketing efforts that started within the latter a part of 2021. Right now, I’m happy to announce that we’re working in shut collaboration with our advertising and marketing companions. We have now efficiently piloted a advertising and marketing initiative to drive extra new sufferers into Vivos coaching supplier practices and to generate extra case begins. This program has exceeded our forecast and is constantly delivering between 30 and 50 certified new sleep apnea sufferers per thirty days into every collaborating workplace.
To place that into perspective, that variety of complete new sufferers could be above common for a typical common dental workplace. We’re starting to roll this new shopper advertising and marketing program out to our whole VIP supplier community. From an organization standpoint, we might see a big monetary impression throughout the board with nearly no incremental funding.
Additionally alongside the direct-to-consumer entrance, we’re saying the formation of an impartial agency referred to as [indiscernible] that seeks to leverage social media influencers to generate consciousness of the various advantages from the usage of our extremely efficient Vivos guides in guiding the craniofacial progress and improvement of pediatric sufferers. Their said purpose is to place 25,000 youngsters into therapy utilizing Vivos merchandise. This firm is led by a few of our most prolific and supportive Vivos docs and former firm executives who’ve witnessed firsthand over a number of years simply how impactful and life-changing our merchandise will be. Vivos is the unique provider of merchandise to [indiscernible].
Lastly, extra of our VIPs ought to start to obtain higher reimbursements going ahead as a result of extra sufferers will now be eligible to have protection for his or her Vivos therapy. That is due partially to a strategic alliance Vivos not too long ago entered into with an organization referred to as Nexus Dental Techniques to create what is anticipated to be one of the crucial complete medical billing companies within the dental business. This collaboration is anticipated to offer each firms’ supplier networks with higher entry to each in or out-of-network billing with all main medical insurance coverage firms, facilitating case acceptances, insurance coverage billing procedures and reimbursement. Once more, this creates further necessary income stream for Vivos. We consider that these mixed efforts will create further consciousness with dentists, enhance VIP enrollments, case begins and income.
In closing, we consider our future at Vivos stays brilliant for the explanations I simply outlined above. We proceed to develop regardless of a difficult atmosphere. We have now quite a few initiatives underway to drive further income progress, enhance VIP enrollment, increase our choices and open up new income streams for Vivos, together with our latest collaboration with Nexus. On the similar time, we’re aware of prices and have taken the mandatory steps to generate everlasting value financial savings whereas shortening our path to money move profitability. We intend to remain the course and stay up for updating you on our progress. Once more, we need to thank our shareholders for his or her persistence as we work by way of our latest rev rec challenges. That is now behind us with a constructive end result, and our eyes are squarely centered on the long run.
And with that, we will start our Q&A session. Operator, please go forward.
Query-and-Reply Session
Operator
Thanks. And this time, we shall be conducting a question-and-answer session. [Operator Instructions]
And our first query comes from the road of Scott Henry with ROTH Capital. Please proceed along with your query.
Scott Henry
Thanks and good afternoon. Clearly, I will undergo the 10-Q, so I will preserve my questions comparatively common. Second and third quarter revenues regarded about within the $4 million vary, which suggest annual fee of about $16 million. I assume the primary query is, what do you assume you’ll count on for an natural progress fee when you consider This fall of this 12 months and the primary half of subsequent 12 months? How do you count on that progress — what sort of vary ought to we be serious about?
Kirk Huntsman
Properly, good day, Scott, thanks for the query. I might say that what we now have seen all through this 12 months has been — as we talked about earlier within the 12 months, there have been some headwinds related to what we have been doing. It appears to have lightened up. We appear to see type of a rebounding impact occurring right here within the fourth quarter and we hope to see that reach into subsequent 12 months.
I might say that the impression of the staffing points that occurred throughout COVID proceed to plague dental workplaces. And we predict that with our Therapy Navigator program that we’ll have the ability to mitigate a few of these results. We additionally — what we do not know but is how rapidly a few of these new income streams will ramp up for us, however I might count on to see us ramp up over the course of subsequent 12 months in a really natural method to the place we’d be properly above the $4 million threshold definitely by this time subsequent 12 months. And I understand that is what we now have going — that is what it was this previous 12 months. However I might count on to see these different income streams kick in, and I feel they are often considerably substantial.
Scott Henry
Okay. And perhaps one other method to ask the same query. You talked about money move breakeven in 12 to 18 months. What fee of income do you assume will get you there? If you consider your first breakeven quarter and annualize that income quantity, what do you assume that’s?
Kirk Huntsman
Properly, I feel the run fee quantity might be within the neighborhood of $25 million, maybe $30 million. I feel as we take a look at our forecast internally, that is most likely what it should take to get to money move breakeven for us. And so, once more, we have trimmed out a whole lot of prices. We expect we will run fairly lean and nonetheless develop income. And we’ll proceed to judge this actually on a month-to-month foundation as we go ahead.
Scott Henry
Okay. So, would you say gross margins sort of trending round 60% proper now? That was once increased than that. What do you assume is extra reflective going ahead, the 60% vary, or do you assume it could be again to 70%?
Kirk Huntsman
My guess could be someplace within the 60% vary going ahead. We have now some alternatives to enhance that. However I feel to be protected and conservative, I might say proper now that I do not see the place the margins will — I do not see a whole lot of additional erosion, however I feel 60% might be a conservative gross margin forecast.
Scott Henry
Okay. So, I am simply sort of doing the maths in my head, 70% gross margin, $7 million 1 / 4. Attending to breakeven, it could suggest you’d most likely have to chop one other $2 million out of bills. Is {that a} honest evaluation? Do you assume — do you may have room to chop that out? Or I imply, both you chop it out otherwise you develop into it with leverage. However to breakeven at $7 million 1 / 4, I feel you are going to need to make some cuts. Is that honest?
Kirk Huntsman
I feel that is honest on the again of the serviette. And so, let’s have a look at what occurs. We have now some fairly excessive margin income streams coming on-line, which we hope will enhance our margins slightly bit additional. So, let’s have a look at what occurs. We have room but to go to chop bills if we have to, and we’re ready to try this as we consider month-by-month going ahead.
Scott Henry
Okay. Nice. I’ll wrap it up there and speak after going by way of the 10-Q. Thanks for taking the query.
Kirk Huntsman
Thanks, Scott.
Operator
And our subsequent query comes from the road of Alex Nowak with Craig-Hallum Capital Group. Please proceed along with your query.
Alexander Nowak
Okay. Nice. Good afternoon everybody. Possibly to proceed there, are you able to increase slightly bit extra on the associated fee cuts that you just do need to happen, those that you’ve got deliberate, those that you just take in case you completely have to? And simply the ideas round these value cuts and the way it could or wouldn’t impression income progress on the go ahead.
Kirk Huntsman
So, what we have performed, as I discussed and I do not know at this level got here throughout clearly or not, however we have actually reorganized from the bottom up and have taken a type of a floor up method of issues. So, we have — the place we had alternatives to get rid of positions or personnel, we did that. And we — largely, we took into consideration our apply advisory mannequin, which was the supply of a whole lot of our overhead.
Bear in mind — you would possibly bear in mind this, Alex, that we — in Q1, we spent a whole lot of time gearing up our apply advisory companies so as to ship individuals out into the market to retrain a few of these employees, people who had been misplaced by the dental occupation, and a few of our greatest suppliers had simply misplaced their groups they usually have been simply — they stopped producing. So, we equipped. And we most likely took on a whole lot of overhead associated to that, that we discovered a greater means with this — with our Therapy Navigator program. We turned that expense line merchandise right into a revenue heart. So, we let among the — after that preliminary surge, we let among the apply advisers go, and we flip the remaining ones over into Therapy Navigators.
And the Therapy Navigators, really, as they pull sufferers by way of the method of stepping into therapy, that truly turns right into a revenue heart for us. So, we took a uncooked overhead and turned it right into a revenue heart. So I might say that, that single effort, which continues to be nascent and popping out of the gate right here, it is not exhibiting up in our third quarter but as a result of that is when — that was the quarter we began piloting this. However right here within the fourth quarter and going ahead, it is received a pleasant margin to it. The service has a very good margin to it. We have now an amazing quantity of curiosity in it, and we predict that’ll be a very good factor going ahead.
Now having made these cuts, as that program comes again on-line — because it grows quite, we will want to rent extra Therapy Navigators. So — however these Therapy Navigators shall be employed to be instantly accretive and worthwhile to the group. So, whereas we did not have a transparent ROI on our apply advisor group, we now have a really definitive and outlined ROI on these new Therapy Navigators going ahead. And so we predict that that is going to assist loads our new product strains that we introduced on board, the expansion of our MyoCorrect companies, which has fairly good margins, the expansion of our billing companies, I feel these issues will enable us to develop organically. And as we add employees going ahead sooner or later, it is going to be as a result of the demand is there and we will deploy personnel with an instantaneous ROI connected to that.
So, I am hopeful that, that’s the mannequin we’ll have the ability to execute on. That is what our mandate is. Every part has been geared now in direction of short-term ROI and quick accretive deployments of sources and personnel. In order that’s how I might reply that.
Brad Amman
Alex, one different — that is Brad. One different factor so as to add on …
Alexander Nowak
Hello, Brad.
Brad Amman
One different merchandise to what Kirk stated was in our VivoScore rings. In 2021, we used VivoScore as a loss chief in actually a software to assist VIPs hit the bottom operating and begin up their screenings of their sufferers. In 2022, we initiated six months of no value lease included with the VIP program, the enrollment program. After which we begin charging them after the 6 months $79.95 a month per ring. So, we will begin to flip that loss chief enterprise mannequin right into a income generator. And we’re beginning to see the income from these ring leases beginning to develop right here within the final half of the 12 months.
Alexander Nowak
Okay. Understood. After which perhaps refresh us on the large research to observe right here going ahead. I do know there was a Stanford head-to-head research going in opposition to CPAP. Simply any replace across the massive research? Every other head-to-head research we must be watching?
Kirk Huntsman
Properly, we have been supremely pissed off over the Stanford trial progress. And it is a bureaucratic nightmare to get by way of that. I can not actually inform you what the standing is as a result of truthfully, we do not know. We preserve nudging them alongside and attempting to get all the pieces achieved by way of the executive course of that they’ve there with their inside IRB, et cetera. And it simply looks as if there’s one roadblock after one other.
So, we’re — we’re persevering with to have a look at that. We’re persevering with to — I imply every single day, we successfully compete in opposition to various therapy modalities. We — and every single day, we take sufferers out of CPAP, get them off their CPAP machines. We compete in the true world in opposition to Encourage and in opposition to all these different therapy modalities every single day.
To get some arduous knowledge on that, one of many issues we talked about however we did not elaborate on is that we’re establishing a college primarily based analysis community of college researchers that can have the ability to conduct open supply analysis utilizing Vivos merchandise, they usually can decide and select how they need to try this. So, in the event that they need to put a analysis venture collectively that compares Vivos in opposition to CPAP or in opposition to different various modalities, then they will definitely try this.
We’re supremely assured within the efficacy of our therapy and protocols. And so, we have opened it up in an open supply format. We have had good response from a number of completely different universities, dental departments and others to conduct this analysis, and we’re very enthusiastic about that going ahead.
So, I want I might offer you some excellent news about Stanford, as a result of it is one we have talked about. It appears like we have been speaking about that each quarter for the final two years. And it simply appears to simply die within the paperwork there at Stanford. We needed to rewrite the protocol about six or eight months in the past, but it surely simply does not appear to get any traction. So, we will proceed to search for options. We have now some concepts round different establishments. If we will not get that exact research to undergo at Stanford, we have had some inquiries from another establishments to do related work. So, we’ll preserve that up.
And analysis is a vital a part of what we need to do right here. Clearly, with the seven pending papers, there’s a whole lot of stuff that is gone on. Whenever you see what we’re about to publish and launch, I feel you will be very pleased with what we’ll have the ability to say. It’s going to assist our regulatory atmosphere. It’s going to assist our credibility with payers. It is simply going to result in a whole lot of good issues. So.
Alexander Nowak
Okay. understood. Respect it. Thanks.
Kirk Huntsman
You guess.
Operator
And we now have reached the tip of the question-and-answer session. I will now flip the decision again over to administration for closing remarks.
Finish of Q&A
Kirk Huntsman
Properly, we’d similar to to thank everybody for being right here this afternoon. I apologize for my voice. I am slightly below the climate at the moment, and I recognize you bearing with me as I cough by way of a few of these issues.
Look, we consider that our way forward for Vivos stays brilliant for all the explanations that we have simply outlined. We proceed to develop. We proceed to navigate a difficult atmosphere. We stay up for sharing our continued progress with every of you sooner or later. So, thanks and have an important day, and joyful holidays.
Operator
And this concludes at the moment’s convention, and you might disconnect your strains presently. Thanks in your participation.