INVO Fertility, Inc. (IVF) Q2 2022 Earnings Report, Transcript and Summary

Good day, and welcome to the INVO Bioscience's Reports Second Quarter 2022 Financial Results Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Robert Blum. Please go ahead.

Hi. Thank you very much. Good afternoon everyone and thank you for joining us today to discuss INVO Bioscience's second quarter 2022 financial results. Joining us on today's call is INVO Bioscience's CEO, Steve Shum; the Company's Chief Operating Officer and VP of Business Development, Mike Campbell; and Andrea Goren, the Company's Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. Before we begin the event, we submit for the record the following statement. Certain matters discussed on this conference call by the management of INVO Bioscience, may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements regarding the Company's expected future financial position, results of operations, cash flows, financing plans, business strategies, products and services, competitive positions, growth opportunities, plans and objections – objectives of management for future operations, as well as statements that include words such as anticipate, if, believe, plan, estimate, expect, intend, may, could, should, will, and other similar expressions are forward-looking statements. All forward-looking statements involve risks and uncertainties, and contingencies, many of which are beyond the company's control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance or achievements. Factors that may cause actual results to differ materially from those in the forward-looking statements include those set forth in the company's filings, at www.sec.gov. Company is under no obligation to and expressly disclaims any such obligation to update or alter our forward-looking statements, whether the result of new information, future events or otherwise. With that said, let me turn the event over to Steven Shum, Chief Executive Officer of INVO Bioscience. Steve, please proceed.

Thank you, Robert, and welcome everyone. I'll cover the general highlights for the second quarter as well as some important developments we see in front of us before turning to Mike and Andrea for additional details. First, all three of the existing INVOCenters continue to make solid progress. While the revenue growth was muted, patient trends and activity in the form of inquiries, consults and initial testing continued to expand and was up sequentially again by approximately 20% from the first quarter. Revenues are ultimately driven from procedures in the clinics, batch patients together and hence there can be some quarter-to-quarter variability based on the timing of those batch cycles. With the current batch is already completed and scheduled for Q3 along with the higher number of patients in those batches, we do expect higher revenue for the third quarter and the patient trends during Q3 are also up sequentially again from the second quarter. So we believe the activity continues to build nicely. Mike will provide some additional details around that. We also believe the current marketing programs, which we initially started in Atlanta and more recently in Birmingham and Mexico are working well and have been a key contributor to the growing or building activity levels. We also continue to learn and gain insight with these marketing programs and plan to implement these programs in a more concerted manner to accelerate the cycle ramp in the future upcoming clinics. We are also exploring additional cost effective ways or marketing methods to help drive further awareness. This includes our plans to produce additional published material around the INVOcell and its success rates and patient costs. Let me also just say we think it's important to understand that it takes time and as a process to establishing a brand new medical practice and build the awareness, reputation and confidence around a local community. Remember many existing IVF practices that are successful and profitable have been around for many years within their community and of course that is our goal to create the same reputation and stature for each INVOCenter. With respect to the previously announced new INVOCenters, the Tampa lease was signed and build out is underway. As we indicated on our last call, we were able to reduce part of the upfront investment required to bring Tampa operational in the form of higher TI and build out cost allocation, being incorporated into the lease rate for the space. Our discussions with potential clinician partners in Tampa are progressing well and we expect to have further updates on that soon. The planned California center is underway as well and also expected to open around the end of this year. And we are making early progress on Kansas City, although some of the early planning steps there have taken a little longer. As we've noted in our past calls, our strategy also continues to evolve and we are finding ways to further expand our efforts. On that point let me shift gears and discuss a new and positive dynamic that has emerged for INVO and one we think is quite additive or complementary to our existing growth strategy that is acquisition potential. We now see the opportunity to acquire smaller to mid-sized established fertility practices. This wasn't part of our focus originally, so you haven't heard us discuss this until now, but it has emerged as a result of our ability to directly interact with the existing practices in the U.S. since resuming control of the distribution efforts in early February of this year. As noted in our press release, we have already signed a non-binding letter of intent to acquire one such practice. It's well established and been in their local community, providing care for over 15 years and nicely profitable. The physician principal share is our vision for providing care and is excited about the INVOcell solution. We are working to consummate the transaction in a reasonable timeframe as diligent and audit review is underway. While this clinic primarily offers conventional IVF today, we will look to work with the physician partner and fully integrate INVOcell and further enhance the operations. For us we think adding an acquisition approach to our strategy makes sense. We are furthering our mission to help patients and bring care to the market and it helps accelerate our ability to build scale more quickly in our operations by adding immediate revenues and positive EBITDA contribution. Equally important we believe we have priced the current proposed acquisition well and structured it in a very favorable win-win manner for both us and the principles. We have also signed an LOI to provide funding to close the transaction in a non-dilutive manner. So we are excited by this specific opportunity and believe we may have additional opportunities with other practices. And again, we think it's very complementary with our efforts to build new practices as well. So we have now developed a more comprehensive approach of both build and buy, which again can bring scale to the business and help bring the whole company to a profitable offering state more quickly. As a quick reminder, any potential acquisition, including this initial target line is subject to completing our comprehensive diligence review. On the overall distribution front, we continue to see encouraging feedback and activity in the U.S. as well as selectively outside the U.S. While that was not evident with order flow in the second quarter, we believe the momentum is building and Mike will add some color on that. Shifting to our clinical activities, I'm also pleased to report we finally completed collecting all the necessary data, have calculated all the necessary statistics around that data, including the comparison to the IVF dataset and have fully validated everything to support our 510(k)submission. All of which is designed to support our five day clinical label enhancement efforts. We believe the data looks very good and we are very pleased with the outcomes and excited to share those with the market as soon as possible. The final submission will be sent in imminently likely within the coming days here. Let me turn this over to Mike for his comments on additional details around our commercialization efforts. Mike?

Great. Thank you, Steve. As Steve mentioned, I just want to add some additional color to support some of the Steve's earlier comments. Regarding our existing INVOCenters, as you mentioned, we're making continuous progress in each of our INVOCenters where patient consult and cycles were up compared to the first quarter. We believe that patient consults are one of the key indicators for us and a key metric to track as the time from consult to cycle is typically two to four months or even longer in some cases. So it's exciting to see the consult steadily building as it should lead to increase patient cycles. One important item to point out is that most centers tend to run their patient cycles and batches as well, typically every other month. So some of our centers only had one batch completed during the second quarter whereas two batches were completed in the same center in Q1, but as the total number of cycles grows, this sequencing will accelerate where we expect to be doing cycles consistently on a monthly basis. This progress being made is due to the enhanced marketing efforts we are executing from both a top down and bottom up approach to drive patients to these centers. From the bottom up perspective, we are conducting physician outreach programs in the local communities by informing the referring OB/GYNs that this technology is available for the patient population. The top down perspective, it is primarily focused on the various social media platforms as well as Google advertising. As Steve mentioned, we are also looking to expand on these initial activities. On the social media front, in addition to traditional advertising on these platforms, we are also doing a number of Facebook live webinars with both our U.S. center leaders, Karen Herrmann [indiscernible], but we are also expanding this program to include our guys from existing IVF centers that offer INVO to their patients. On the Google front, we are doing key ad work campaigns for fertility treatment in our targeted markets and all this activity is driving patients into the clinics and creating awareness, which we believe is critically important to our long-term success. So going back to my comment about patient consultations for a moment, the way we look at this is in three different datasets. First off, we typically offer a free 15 minute phone consult that's generated from the advertising. The objective here is to move this conversation to a more formal consult appointment. After the formal consult, depending upon a number of factors, potential patients would then move on to treatments, workups and ultimately cycles, again is generally a two to four month lag time from the initial phone consult to the cycles being initiated. We're also seeing improved conversation here as well. While not every patient is indicated for INVOcell, we are seeing improved success in communicating the unique benefits of INVOcell and how it may be an effective option for them. With increases in consultations, again we believe this sets the stage for long-term sequential growth. Regarding cycles, we completed a total of 59 cycles during the second quarter on our INVOCenters and we completed 24 cycles in July and have three additional batches scheduled in August and September. So we expect our 3Q number to significantly increase for the quarter. Transitioning a bit, we are actively focused on our initiatives for our planned new centers as Steve mentioned in the Bay Area, California, Tampa, Florida, and Kansas City, which we previously announced. As highlighted earlier, we are targeting metropolitan areas that need a number of key criteria that we believe make them highly attractive markets suitable INVOCenters. Each of the centers are at various stages of completion and we are on target to open Tampa and California before the end of the year. We believe that the blueprint we attained from our Atlanta and Birmingham clinics, we think that this will help accelerate all aspects of our future clinic build outs, including construction, operations and marketing. Shifting to the distribution front. As Steve mentioned, since we're gaining control of INVOcell's distribution in the U.S., we have engaged with most of the domestic IVF clinics that were trained on the INVOcell. These interactions have yielded renewed interest in the adoption of INVOcell and the IVC procedure and it has also led to new INVOCenter partnership discussions and generated potential acquisition opportunities that Steve has already mentioned. We're extremely pleased with the increased interest from reproductive endocrinologists, who want to add INVO to their patient offering. We have several support programs that we can offer to help integrate into their practice and also help generate patient awareness in their local markets. Our focused INVOCenter marketing strategy is important to drive overall awareness and demand, but patient success will truly accelerate and will saw interest as we look to secure our national footprint as an affordable and accessible alternative to traditional IVF. Our patient success rates are aligned with our expectation and we are increasing awareness on a national level. In fact, we had over 3,000 views for Dr. Herrmann's Facebook webinar last month detailing the benefits of INVOcell. Just a quick update on our international activities. In China, our partner Onesky has started with the product registration at the NMPA. First, documents have been submitted and we are now in the process providing product samples for testing. The NMPA product testing phase will take about three to four months. In addition, the first distributor training has been completed and the second clinical training will be organized at the end of August 2022. As a reminder, Onesky will be responsible to register the product in country and upon government approval they will be obligated to purchase minimum quantities of INVOcell totaling approximately $14 million over the initial five year term of the approval. We are pleased with the progress being made here and we are very excited about this relationship. In Malaysia, IVC will officially be commercialized at HUKM University Medical Center later this week. HUKM will start offering INVOcell in both via public and private sectors and are planning to complete 30 cycles to 40 cycles by the end of 2022. Additionally, we have a fertility partner currently in process of setting up INVO lab in their existing hospital. They have engaged contractor and construction start in the next coming weeks. This INVO lab is expected to be up and running by Q2 2023. In India, we had to pivot following the pandemic, but we do have two separate REI [ph] groups that are planning to set up fertility centers in their existing practices. Space has been allocated, and we are looking to enter into agreement to support their efforts with a unique business model that we believe could be mutually beneficial for both of us. In Pakistan, we have engaged – we have been engaged to help set up an INVO center in a brand new hospital be both out there. We recently completed our initial training, following a visit from Inger Carlsson of VP of Clinical Affairs. And we expect this new center to be open in Q1 2023. And finally, in Europe with European summer holidays coming to an end, we are expecting to see a nice ramp heading into the fourth quarter. Spain is leading the way with several fertility centers offering INVOcell in this market, and we just received government approval in Austria to market INVOcell and our partner center is in process of initiating their initial patient trial. So overall, we have extensive activity in the funnel with great opportunities around the globe. We’re excited about the future at INVO. Thank you for your time. We appreciate the continuous support. With that, I’ll turn it back to you, Steve.

Great. Thanks, Mike. I’ll just pass straight to Andrea here to quickly cover the financial highlights.

Thank you, Steve. Thank you, Steve. Revenue for the quarter totals approximately $146,000 compared to approximately $208,000 in the prior year period. We recorded a net loss of $2.8 million compared to a net loss of $1.8 million in the prior year, excluding non-cash charges mainly related to equity based compensation. Our adjusted EBITDA loss was $2.2 million compared to an adjusted EBITDA loss of $1.3 million last year. The $2.2 million adjusted EBITDA loss for the quarter included approximately $250,000 that is attributable to our joint ventures. As such an apples to apple comparison of our adjusted EBITDA loss would be $1.9 million in the current year compared to $1.3 million last year. And this was slightly better than our internal operational goals. Revenue consisted of product revenue from INVOcell sales to IVF clinics in the U.S. and to distribution partner’s abroad as well as consolidated revenue from our Atlanta INVO Center. Most of last year’s Q2 revenue was related to the amortizing deferred revenue for the Ferring license, which has since been fully amortized. Our product grew, sorry, our product revenue grew slightly compared to the same periods last year. Our gross margin decreased between periods as a result of the inclusion of cost of goods sold for the Atlanta INVO Center and not from a sudden change in our product gross margins, which remain largely unchanged. As a reminder of our three operating INVO Center joint ventures at Atlanta is consolidated with our operating results, while Birmingham and Monterey are accounted for using the equity method. The Atlanta INVO Center generated $112,000 in revenue for the quarter, a slight increase from this year’s first quarter. And as both Steve and Mike highlighted, we expect continued growth and patient flow resulting from our marketing activities. Atlanta’s operating expenses were approximately $186,000 for the quarter. Our note receivable from the Atlanta joint venture, which stood at $450,000 on June 30 was eliminated as an intercompany transaction and consolidation and is not reflected on our balance sheet. In addition to this note, we also made an 850,000 equity contribution bringing our total investment to approximately $1.3 million as of June 30. To date, we have invested $1.7 million and $200,000 in the Birmingham and Monterey joint ventures, respectively, which amounts remain unchanged from the last quarter. These joint ventures generated combined revenue of $166,000 in the second quarter, and a combined net loss of $249,000. We ended the quarter with approximately $2 million in cash and no outstanding debt. We are sourcing additional capital to support our INVO Center expansion plans and corporate needs. We believe the options available are reasonable, and we expect to provide updates on specifics in the near future. As noted, we signed a letter of intent with a funding source for non-dilutive support over contemplated acquisition, and will continue our efforts to minimize dilution for the benefit of all INVO stakeholders. As of today, we have approximately 12.2 million shares of common stock outstanding, and approximately 260,000 warrants. Back to you, Steve.

Great. Thank you, Andrea. Before we open for questions, let me just reiterate, we see a lot of very positive developments unfolding for INVO. Our existing clinics are building. We believe we now have the opportunity to selectively acquire and integrate existing established practices, which would enable us to scale more quickly and with an ability to integrate INVOcell into those legacy operations. We believe we can further enhance them as well as provide a more comprehensive solution, able to address all patients and their respective needs regarding what specific treatment option fits best for each. Our distribution activities are building, and we clearly see that our overall presence in the market is expanding. We have a lot more work to do on this front and will, but our initial efforts are making an impact that we feel will drive forward growth. With that, we’ll now open up for questions. Operator?

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] Our first question comes from Larry Udall from Udall Associates. [ph] Please go ahead.

Hi. You have in the past been talk – had talked about doing a study on or redoing your study to have your device fit in with what people are using today. That’s the five-day seminar with the – or the five day use of the – as opposed to with three day, which is what it was approved for. What’s the status of that?

Yes, Larry that, as I said, we’ve been focused on that effort utilizing the real market usage data available. We were fortunate to be able to collect that information from five specific clinics that had a volume of data that was sufficient that did that process did take a while to collect all that information. And we’ve been talking about that for the last few quarters about the process. As I just mentioned, we’ve successfully finally completed that. We have all the data. We’ve already done – we’ve done all the statistical calculations. We validated the data and everything is there to support the submission for the 510(k). And as I mentioned, it’s imminent that we will be submitting that information likely within the coming days here.

But that, so you are saying it’s imminent that you’ll be submitting the data, but how long will it take to get an approval or a disapproval?

Well, we would likely anticipate any questions from FDA within a 60 day to 90 day period. That was generally the response time we saw last time. So we think that will be consistent this go around as well. So we should hear back with any open questions from their standpoint relatively quickly.

And what would you expect that would do for the company?

Well, I think it will be extremely helpful from the standpoint of being able to reflect outcomes for five-day data. Obviously, we have to – we’re limited in what we can say and promote around specific usage. Our marketing efforts are focused on what our label was approved for. So some of the physicians out there that work with our device can speak more openly about their specific results around their usage. But for us, it will be fantastic when we can speak to it more broadly from a company standpoint.

Okay. What does your use – what does the use of your product cost when you market it to other people?

You mean, what do we sell the device to other clinics?

Yes.

It’s – what we’ve said in the past is we’re selling it to the existing clinics a little more attractively priced than what Ferring had been selling for. And Ferring was around the $500 price range per unit. So we haven’t given a specific price point that we’re selling into the market, but like I said, it is better than the original price that Ferring was selling.

And what would you expect that the change in status of it, assuming that’s given would do for you?

Well, I think it’s already been helpful. But I think it’s – there’s another element that has also been helpful in that. For us, we’re able just to sell the device free of any other I would say, I wouldn’t say it was a requirement, but Ferring had done some bundling in terms of their pricing structure and it was a little more complicated and the price varied depending on the amount of drugs that the clinic was willing to purchase simultaneously. So for us, we’re able to streamline that for the clinics. So I think its two factors. It’s the fact that they can purchase at a more favorable price and we’ve made the ordering process much more simple for them. And Mike can elaborate on this, but I think that our efforts to reengage with the IVF clinics directly that messaging has been well received.

Yes. Larry, I’ll just add in real quickly. Yes, the five-day label is critically important to us as Steve mentioned, because we don’t get to device – we are using the current available information. So, I mean, until we can do that. So Steve mentioned doctors in individual clinics can promote their current success rates. But on a national average, we are not allowed to do that by the FDA. So being able to do that is going to be hugely beneficial to get the word out on the effectiveness of the product if it’s used at day five.

Okay. All right. Do you want me to go on or do you want to go on.

No, Mike, unless you just wanted to add, the interaction that both have been having with the clinics and interest in utilizing INVOcell within the practices.

Yes. Yes.

Add any further color to that.

Yes. As Steve mentioned, when we got to take this back in February, Larry, we hired a resource from that we worked with the Cooper Surgical for the U.S. market provides your bet who has relationships in place, and we’ve had fantastic discussions with the market. I think, the key indicator was the integration of the product into the practice. So the IVF center is a typically very, very busy. And what we have found and learned is that they like the technology. They just can’t figure out a way to get it into their practice and be able to utilize it on a daily basis. So we’ve had great discussions with Larry [ph] about utilization and expansion. So we talk about expansion and as Steve mentioned, we talk about there’s lots of programs we put in place to help these folks. We do have a few clinics currently that we have a partnership, a marketing partnership program. So we are actively marketing in their local communities. We’re sending patients into the clinic. The other issue with the IVF centers is that patients are not getting referred to these IVF centers because their referring physicians don’t know about the technology. So the other real big thing that we talked about today was the bottom up approach by going out into the local communities and informing the OB/GYNs that this technology is available for the patients and we’re seeing those referrals increasing as well.

Okay. All right. Thank you.

Thanks, Larry.

Thanks, Larry.

The next question comes from John Heerdink from Vista Partners LLC. Please go ahead.

Good afternoon, gentlemen. Thanks for taking my questions. Congratulations on the quarter.

Hi.

Hi. Hi, Steve. Congratulations on the quarter. It’s exciting to see the progress on all fronts. I’m particularly interested in this acquisition strategy that you speak to and the LOI that’s been signed and the debt facility that non-dilutive financing to be able to acquire and a profitable company. Could you speak to it? Is there any other details you could add to this? And also when I’ve looked at the market, it looks like there are about 400 plus, maybe you have more specific details fertility clinics in the U.S. alone. It's a fairly broadly owned clinics outside of a couple, I guess groups in U.S. fertility which owns about 10% of that market. So it would seem like there's a very significant opportunity to really grow the company if successful in pushing forward an acquisition strategy that just compliments what you're doing and trying to grow the awareness and the adoption of INVOcells. Can you speak to that a bit more in detail?

Sure. Well we thought a lot about how much detail to provide on the specific initial target acquisition. What we felt was probably more important for this call was to describe how things are evolving and that an acquisition approach or opportunity has presented itself. And to describe that we've added this to as part of what we think we can do as a company. Certainly this targeted acquisition will be meaningful in terms of revenue and adding earnings to the business. But until we kind of complete the remaining aspects of the diligence and are ready to close. We've decided to sort of wait on those additional details till we're a little closer, but as I mentioned, we are working our way through that effort and it already had started quite – several months ago. So it's in process. And again, we're excited by it, but more importantly we're excited by this, this approach that we think we can continue to pursue. It's unclear to us how many potential interested parties might be out there when you look at the landscape, as you mentioned the 460 or so clinics. There's probably somewhere in the order of 100-ish that are in that smaller to mid-size clinics. I would say anywhere from a couple million dollars in revenue to $5 million or $6 million. And we think those are that's probably the right size kind of clinics that we would target. Again, I would also say that this, this opportunity presented itself through our discussions with clinic operators to work with. So it wasn't something that we had thought about previously. It really resulted from the conversations and how those conversations have evolved in a favorable way. What we've seen is practitioners that would like to figure out how to better integrate into their existing practices. We've seen practitioners who have said for the challenges that Mike mentioned about trying to integrate into the practice, but they like the technology enough that we've seen several say, you know what I'd like to maybe partner up with you and build an INVOCenters with you. And then lastly, practitioners that would – maybe had like to have a closer relationship for them it's a strategy of what to do with their practice from a long-term perspective and putting it within inside of a public company platform. That's also got a mission of trying to add capacity and care to the marketplace. We think there's – we think there are – we certainly believe there are practitioners out there that that would like to do that. And again, it's why we've already one under LOI and we have a couple other discussions ongoing around this.

Okay.

I don't know if I covered all your – all your different elements of your questions there, John.

Well, yes, there's always more. But it would seem to me that if you are successful in tucking in an acquisition, you are likely to have those positions that are already operating that fertility to continue to be in play. I don't know if that's safe to assume, but that's what I would assume here. So you've already got existing business that's, yes, that would be running in. And with that process of acquiring and controlling, it would be one where you'll implement a process into the – get the adoption of INVOcell within that practice, which will serve as a very solid example for anyone else that's looking to integrate and/or struggling to integrate it into their own practices for one reason or the other. You'll have a blueprint or you already have a blueprint to some to serve to this existing fertility center. Is that – am I on in line with what you're thinking there or?

That's absolutely the thought process we think we can, in our minds do a full proper integration of the technology within the practice, allow the practice to see more patients and enhance its operations. And again ultimately be a more comprehensive solution to be able to target treatment that's most appropriate for patients. So in essence a facility that can take all types of patients, whether the patient has affordability challenges or not. So it just – it just gives, like I said a more comprehensive solution to be able to provide care to a broader set of patients out there, and again also enhance the operation.

You've spoken before about the capacity constraints of IVF and fertility clinics in general and the ability of INVOcell, the system to increase capacity within an INVOCenters or an IVF facility. Can you speak to that or any ratios that you could serve to what degree we could or range that we could expect that you could increase capacity?

Yes. I mean, I think it depends if you're looking at building a brand new practice focused specifically on INVO or we're doing, you know, taking an existing practice doing conventional IVF today and incorporating INVO. So – but in either scenario where it's really driven by the efficiencies in the lab that INVOcell provides that allows a clinic to be able to really handle a higher volume of patients than they could do otherwise. So if it's a brand new – if it's a new clinic focus just on INVOcell we believe there's a – there's some data that points to all things being equal. The volume of patients at facility could treat versus if it was doing conventional IVF. If it's a facility already doing conventional IVF, we believe that's a little bit different dynamic in that we don't – we would envision the clinic continuing to treat how they treat today with conventional IVF, but incorporating INVOcell into their practice. And it's not – it allows them to, we think it allows them to also see more patients, but probably not as many if it was a dedicated center doing INVO. Because they still have the resources that are needed for performing conventional IVF, but in either case certainly the technologies. Mike, sorry.

I just want to throw a little collar on that, John. What's important here, we mentioned earlier in the call is batching. So if you have an IVF Center, that's doing patients every day, then that's where we find the difficulty integrating this into where if they go into a batching technique where they batch patients, that provides the most efficiency and that's why our IVF, that's why our INVOcell do batching. So they got to do a whole compliment of patients at the same time, it's very efficient.

That makes sense. Switching back to the acquisitions, if you have the targets or sort of that, if I heard you right to the sort of $6 million in range, can you speak to what type of EBITDA that on average that you're looking at that are out in the marketplace. What is the average fertility clinic like that and those targets that 100 plus that you mentioned that are out there. What are they making?

Well we're sure every clinic will be different. We obviously don't have privy to all of the financials of those clinics, what we've seen with the one under LOI and a couple others. It seems they've all sort of been in that 25% to 35% range, basically in terms of net contribution from their revenue levels.

Okay. So if you're say, say it's $5 million, you're talking about like $1.2 million, $1.5 million on average an EBITDA. Is that what you're saying? Is that what I'm hearing?

Yes. Conservatively speaking, yes.

Okay. And so if you're able to do that...

Go ahead, John. No, no, go ahead.

Well the thought is that if you're – if you got an acquisition somewhere in that range and you might have others in view, you're speeding yourself towards profitability quite quickly with that method of growth. And so if your five – two or three of these together you're anywhere from call it $7 million to $15 million in the top line drop in significant EBITDA to the bottom line, pushing yourself into profitability, much quicker than anybody anticipate if you go down this road.

Yes. Without question, but to us it's also – it's even better than that in a sense that if we can successfully acquire again selectively existing operations, while at the same time the ones we already have in the marketing place are ramping. Then it's not only quickly adding scale to the operation, but even our existing clinics. We feel our building and scaling too, so the idea being that if, again if we can close – as we close an acquisition and maybe even a couple going into the following year with also Atlanta and Birmingham and Mexico continuing to ramp bringing on another couple of new INVOCenters, it all starts to add up quite quickly. So it's not just, I mean, acquisitions are great. Again, they add the scale you're referring to, but we also see even our existing new centers are building scale as well. They take a little longer, but we're already into the first centers and we can see what's happening in those. And we think that it's going to result in higher revenue flow within the existing centers. And this is the key point that Mike was trying to make is that patient activity has been building and we're finally in this third quarter starting to see the results of some of that building that's been going on in the past couple of quarters start to reflect more favorably in the revenue. We think that's only going to continue to build from here. So if we can layer in an acquisition or even a couple on top of that activity, I think we'll start again – we'll start looking much more significant than we do today.

Got it. Well, I guess it would not to put words in your mouth, but I guess with the significant amount of insider buying that we saw in June and then I think it was 94%, 95% level from several members of your Board. And I believe three members of the management team that are on this call today that to me speaks a great deal of confidence. Can you speak to that and why you – why you personally did that and or you think that the rest of the team made this investment?

Well, I'll even go further back for you, John. I thought that the investment was extremely attractive in our last year's offering based on how we felt about the business at 3.20. And so when the opportunity presented itself to acquire [indiscernible], that for me, it was, and I think for the rest of Management and the rest of the Board, it was – it was pretty attractive. We can recognize that maybe certain things have taken a little bit longer. Some of that's in our minds hasn't been entirely in our control. Some of it is maybe we could have in hindsight, sort of some of our marketing activities more quickly, but we absolutely are convinced it's working. And now with the new dynamic of acquisition opportunities with like-minded physician partners that want to team up with us and put their practice under our umbrella and help us build what we're trying to build together, and again treat more patients out there, it couldn't be more exciting for us.

I would tend to agree from what I'm seeing here. So I'll step off the call. I really appreciate you addressing my questions and keep in the pedals to the metal to push your business forward. And I love the acquisition strategy. Excited to see that you confirm that first one here very soon and good luck in the meantime and good business.

Thanks, John. Appreciate it.

The next question comes from Curtis Thom from Paulson. Please go ahead.

Hi. Thank you. Congratulations, Steve. I think the – it sounds like the acquisition strategy is going to be very well received based on first cut, but what I'm asking for and it's not to pin you down on specific guidance, but just, if we're looking out three, five years, how does this acquisition strategy change the business model kind of long-term intermediate term? How does it affect the long-term growth rate? How does it affect the long-term margin structure and so forth? And I don't need in, I'm not looking for any guidance or hardcore numbers, but just kind of how that is going to impact it. How that's going to affect it, your growth rate margins so forth?

Well, it's even a short-term impact too Curtis. Assuming we can consummate the acquisition here in the near future as we're looking to try to do, so it's a short term, intermediate term and long-term impact. And in our minds, it's significant. We felt we had a significant opportunity to build new INVOCenters. And as they ramp and get to a reasonable level and if you have even a small number of them, we build a lot of scale on the business. I think when adding acquisitions and again we don't know how many opportunities will present themselves, but assuming there is at least a few and maybe it grows over time as we show how that works. It could add significant further addition to the business. And we will certainly where they make sense where we think we have like-minded partners. We will continue to pursue acquisitions if they can be priced attractively, structured well, again as a win-win for both us and the partner. And again, that is an area that will really put a lot of flow into the organization when you can – you close an acquisition and certainly off the current base we're on if we – as we close an acquisition that's generating several millions of dollars on the top line and being – and profitable, it's quite additive. I'm kind of – I'm not giving you – I know you're not wanting to pin us down and I'm – and I guess I'm giving kind of high level, but it's very – it will – it could potentially be very significant and additive to what we're already doing. It looks like we might lost Curtis…

There are no more questions…

Yes. It looks like we might have lost Curtis, so hopefully…

No, no, no, there we go. Sorry. Sorry. We get on mute. Yes.

Oh.

I didn't want you to hear all this noise in the background. Sorry.

No problem.

So like how much faster would this get you to call it $100 million revenue? Or how much faster would this get you to kind of that magic number $0.5 million – $0.5 billion in revenue. How would that affect the long-term or even near-term intermediate term growth rate? That's kind of what I'm looking for because I think you're going to get paid on your multiple. I mean, I think, the Street is going to get react really well. I think it's going to bode favorably for the multiple, but I just want to see how it's going to flow through to the bottom line and where we're going to see the impact on growth?

Yes. I think from what we see is this first potential acquisition, it shortens our pathway to when we talk about scale for us the first objective is getting to overall profitability, right. And I know there is a longer term picture we can speak to, but our more immediate goal is bringing the whole operation to profitability and the contemplated first acquisition I would say shortens that pathway by probably at least 12 months, thereabouts.

Great. So get us to profitability…

Remember it's not – but – what's that?

Get us to profitability potentially four quarters earlier, right, a year early, right?

That's what we kind of think, yes.

Okay.

I mean, Andrea might put a finer point to that, but that's approximate – that's approximately how we see it.

Okay. That's good. I've taken up enough oxygen. Thank you very much, Steve, and congratulations. Talk to you soon.

Thanks Curtis.

This concludes our question-and-answer session. I'd like to turn the conference back over to Steve Shum for any closing remarks.

Well, great. Thank you again. And we appreciate everyone that joined us on the call today. Please do not hesitate to reach out to us with any additional questions and enjoy the balance of the summer. Thank you.

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.