Vivos Therapeutics, Inc. (VVOS) Q3 2025 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to the Vivos Third Quarter 2025 Conference Call. [Operator Instructions] This conference call is being recorded, and a replay of today's call will be available on the Investor Relations section of Vivos' website and will remain posted there for the next 30 days. I will now hand the call over to Brad Amman, Chief Financial Officer, for introductions and reading of the safe harbor statements. Please go ahead, sir.

Thank you, Constantine. Hello, everyone, and welcome to our conference call. A copy of our earnings press release is available on the Investor Relations section of our website at www.vivos.com. With me on the call today is Kirk Huntsman, Vivos' Chairman and Chief Executive Officer. Today, we'll review the financial results for the third quarter of 2025 as well as more recent developments and Vivos' plans for the rest of 2025 and beyond. Following these formal remarks, we'll be happy to take questions. I would also like to remind everyone that today's call will contain certain forward-looking statements from our management made by -- made within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended concerning future events. Words such as aim, may, could, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates, goal and variations of such words and similar expressions are intended to identify forward-looking statements. These statements involve significant known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant risks, uncertainties and contingencies, many of which are beyond the company's control. Actual results, including, without limitation, the results of Vivos' growth strategies, operational plans, including sales, marketing, distribution, medical sleep provider acquisition and integration, research and development, regulatory initiatives, cost savings plans and plans to generate revenue as well as future potential results of operations or operating metrics, such as the potential for Vivos to achieve future positive cash flows or profitability and other matters to be addressed by Vivos management in this conference call may differ materially and adversely from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the risk factors described and other disclosures contained in Vivos' filings with the Securities and Exchange Commission, including the risk factors and other disclosures in our Form 10-K for the year ended December 31, 2024, and our other filings with the SEC, including our third quarter 2025 Form 10-Q filed with the SEC today, all of which are or will be accessible on the Investor Relations section of Vivos' website as well as the SEC's website. Except to the extent required by law, Vivos assumes no obligation to update statements as circumstances change. Finally, please be aware that the U.S. Food and Drug Administration has given certain specific Vivos appliances 510(k) clearance to treat mild to severe OSA with the FDA clearance of certain Vivos products for severe OSA in November of 2023. Treatment of patients with severe OSA with these specific appliances is no longer needed to be performed off-label at the clinical discretion of the treating doctor and is now an integral part of the Vivos treatment protocol. Treatment of OSA of any severity or any other condition with any other Vivos FDA-cleared devices remains at the clinical discretion of the treating doctor. For further information on our results for the 3- and 9-month periods ended September 30, 2025, please see our earnings release, which was distributed earlier today and our quarterly report on Form 10-Q, which is available on the SEC filings portion of the Investor Relations section of our website. With that, I'll now review our financial results for the quarter. We are very excited about our results of operations for the third quarter of 2025, which show the outcome of our first full quarter of activity following our June 10, 2025, acquisition of the Sleep Center of Nevada or SCN. The message from our numbers is very clear. The pivot to our sleep medical practice acquisition and strategic alliance model is taking hold. For the third quarter of 2025, revenue increased 76% to $6.8 million compared to $3.9 million in Q3 2024 and 78% sequentially versus second quarter of 2025. The increase in total revenue during the quarter reflected an additional $2.7 million in service revenue and approximately $200,000 in additional product revenue. During the quarter, we saw a $2.2 million increase in OSA sleep testing services, primarily generated by SCN and $1.3 million generated from treatment centers launched at 2 SCN locations in Las Vegas. You will see this new treatment center revenue broken out separately in our financial statements. Because of SCN, this is our first time we are recognizing this kind of revenue. Our revenue growth was offset slightly by a decrease of $800,000 in VIP enrollment revenue from our legacy business model. We are pleased to see that VIP enrollment revenue is becoming increasingly less material to our company as our new model grows, and we are expecting to be finished with recognizing any such legacy revenue by the end of 2026. For the 9 months ended September 30, 2025, our revenue increased approximately $2.3 million or 20% to $13.6 million compared to $11.3 million for the 9 months ended September 30, 2024. The increase in total revenue was impacted by an increase of approximately $2 million in service revenue and $300,000 in product revenue. The increase in services revenue is attributable to $2.8 million in sleep testing services, primarily generated by SCN and $1.6 million of new treatment center revenue. This was offset by a decrease of $2.6 million in VIP revenue from our legacy business model, which is -- which as noted, we continue to wean off of. For the 3 months ended September 30, 2025, cost of sales increased $1.3 million or 87% to approximately $2.8 million compared to $1.5 million for the 3 months ended September 30, 2024. This was expected and primarily attributable to higher costs associated with key investments we made in integrating SCN, including $0.5 million related to appliance, pediatric and lifeline fees, $400,000 related to SCN operations, $300,000 increase in support costs for the treatment centers, such as staff compensation and financing fees and a $100,000 increase in software and medical reporting services. For the 3 months ended September 30, 2025, gross profit increased approximately $1.6 million to $3.9 million. This increase was attributable to the increase in revenue of $2.9 million, offset by an increase in cost of sales of $1.3 million. Gross margin increased slightly to 58% for the 3 months ended September 30, 2025, compared to 60% for the 3 months ended September 30, 2024, due to the higher increase in cost of sales as a percentage of revenue. For the 9 months ended September 30, 2025, cost of sales increased $1.7 million or 37% to $6.1 million for the 9 months ended September 30, 2025, compared to $4.4 million for the comparable period in 2024. This again reflects our investment in SCN, as I noted. For the 9 months ended September 30, 2025, gross profit increased $600,000 to $7.6 million. This increase was attributable to the increase in revenue of approximately $2.3 million, offset by an increase in cost of sales of $1.7 million. General and administrative expenses increased by approximately $5.7 million or 42% to $19.2 million for the 9 months ended September 30, 2025, as compared to $13.5 million for the same period last year. The primary cause of the increase was approximately $2 million in costs associated with running SCN operations, $1.6 million related to professional fees, $1.1 million associated with salaries and wages on additional personnel, infrastructure costs of $600,000 and equipment, repairs and maintenance of $200,000. Other expense increased by $600,000 and $800,000 for the 3- and 9-month periods, respectively. Our net loss increased to $5.4 million in Q3 and $14.3 million for the full 3 quarters of 2025, reflecting the higher costs associated with our business model pivot. During the first 9 months of 2025, we used $1.7 million more in cash in operations and $5.5 million more in investing activities compared to the comparable periods in 2024, largely due to our acquisition of SCN and increased net loss. We also secured both debt and equity financing, providing us with $14.2 million in net cash from financing activities. The equity financing in 2025 came from an affiliate of our existing significant investor, Seneca Partners. As of September 30, 2025, our balance sheet showed total liabilities of $23.1 million with cash and cash equivalents of $3.1 million and stockholders' equity at $2.5 million. In summary, we're seeing significant increases in revenue, reflecting the acquisition of SCN and related OSA diagnostic and treatment revenue, which is extremely encouraging. We are also seeing some increased costs from the hiring of SCN personnel on the diagnostic side and additional hiring on the treatment side, plus some noncash depreciation expense. We've learned a lot from our first quarter of operating SCN, and our goal will be to drive growing revenue by meeting the significant demand from OSA patients we are seeing while better understanding and prudently managing costs as we have historically. We believe the strategic move to acquire SCN and other potential affiliate alliances and acquisitions set the stage for stronger performance in coming quarters. For more detailed information, I refer you to our earnings release and in our first full Form 10-Q filed today. And with that, I'll hand the call over to our Chairman and CEO, Kirk Huntsman, for his thoughts on our Q3 performance and what it means for the future of Vivos. Kirk?

Thank you, Brad. Good afternoon, everyone, and thank you for joining us on today's conference call. The third quarter of 2025 will go down in the history of Vivos as a watershed quarter and an inflection point in the trajectory of our business. It is this latest quarter that first signaled our company's ability to monetize on a potentially large scale our life-changing technology for treating sleep-related breathing disorders such as obstructive sleep apnea. Here at Vivos, we have firmly believed for many years that we possess the most innovative, most clinically effective, most cost-effective, most safe, the most preferred and easiest-to-use treatments for OSA in the world. And we backed up those beliefs with literally dozens of peer-reviewed published studies in both medical and dental journals around the world. Time after time and study after study, Vivos' novel and proprietary oral medical devices have been shown to be safe and highly effective in treating OSA. In a landmark study first published in 2022, independent researchers revealed actual clinical results showing complete nonsurgical resolution of OSA symptoms using industry standard metrics in adults after just 10 months of Vivos treatment, and with no need for further intervention. To our knowledge, no one had ever before shown such amazing clinical results. Many of those studies were authored by some of the leading researchers and clinicians from universities and hospitals like Stanford and Mount Sinai . Regulators at the FDA and other international agencies also took note. And over the past dozen years, granted this company multiple unprecedented clearances, thereby opening the door for Vivos to compete head-to-head on with the medical industry's 40-year-old and much maligned gold standard treatment of CPAP. Today, Vivos CARE oral medical devices are the only oral appliances in the world that are FDA cleared to treat severe OSA in adults and moderate to severe OSA in children. Ironically, over the past 5 years or so, that same FDA has recalled millions and by some accounts, as many as 10 million CPAP units here in the United States because of over 560 reported deaths and over 130,000 adverse health incidents potentially caused by CPAP use. A recent study just showed that prolonged CPAP use actually increases the risk of adverse cardiovascular events. Yet despite all those warnings, CPAP remains the go-to first-line treatment option for up to 95% of patients first diagnosed with sleep apnea. It is difficult to imagine a more perfect scenario or market timing for Vivos. Our technology is clearly superior to virtually every other option for most people. And based on our experience in Las Vegas and elsewhere, it is widely preferred by a large majority of patients over its primary competition, which virtually no one really wants to use every night for the rest of their lives. So we have the right patented and FDA-cleared products or technology, and we have a large and growing market to service. Our challenge has always been figuring out the best way to get our breakthrough solutions into the market. And we believe this past quarter's results show that we've struck upon the right model to do just that. Our strategic pivot away from a reliance on dentists and towards more direct affiliations with or acquisitions of medical sleep practices and testing centers was designed to put Vivos technology and solutions in front of far more OSA patients while yielding a higher financial return to our company. We see these third quarter results as a validation of our core thesis, which was that when OSA patients are fully informed and presented with the full measure of clinical treatment options, a large majority will choose Vivos over the alternatives, including CPAP. Now to briefly review how we got here. In June, we closed on our acquisition of Sleep Center of Nevada. This group medical practice in the Las Vegas area specializes in a full range of in-lab and home sleep testing solutions with corresponding sleep study interpretations and consultations. Historically, SCN did not venture into the treatment aspect of things, but a large majority of their patients were referred by SCN medical professionals for CPAP and a small minority were referred for traditional oral appliance therapy. One important factor here behind our success to date at SCN has been that the level of cooperation and buy-in from the existing SCN medical team and support personnel in Nevada has exceeded our expectations. In fact, 2 of the lead sleep MDs at SCN and their families were among our very first patients. Having the full and unwavering endorsement of the medical team at Sleep Center of Nevada who have been waiting for a viable alternative option for CPAP to CPAP or surgical solutions for their patients has been critical to the ultimate success of our model. As a result of the SCN acquisition, Vivos established what we call Sleep and Airway Medicine Centers or what we call SAMC centers in 2 locations, one being co-located in the same building as SCN's flagship center, which we call Charleston; and the other in Henderson, Nevada, a Las Vegas suburb. The purpose of these operations was to educate and evaluate SCN's patients for treatment and provide them with whatever treatment option they might choose. Our SAMC clinics there are staffed by what we call our sleep optimization teams of medical, dental and specially trained providers and staff. These teams are at the heart of our new model and are driving the revenue growth we experienced in the third quarter. Now, early in the third quarter, we realized that the demand for SAMC services was far outstripping the production capacity of our SAMC centers and teams. We, therefore, immediately moved to expand the facility at Charleston and relocate the facility at Henderson. Concurrently, we recruited, hired, trained and deployed additional sleep optimization team members as rapidly as we could. These efforts have proceeded ahead of schedule and under budget. However, the costs associated with such growth are immediate and occur for up to 60 days or more prior to when the first patients can be seen and revenue production can kick in. This reality has impacted our third quarter results by showing higher-than-normal expenses relative to recognized revenue. In addition, as Brad mentioned, every day we are learning lessons on the ground that over time will help us optimize existing and expanded operations. This includes things like the time it takes to assemble teams to service demand, train those teams and obtain in-network insurance coverage. We are applying these lessons and thus, we expect that revenue growth in the coming quarters will outpace expenses as we more fully deploy these new teams into 2026. We believe we are currently servicing significantly less than 40% of the potential new patients being tested each month at Sleep Center of Nevada. We believe there are even more legacy SCN patients out there who are either dissatisfied with their CPAP units or who have discontinued their CPAP treatment altogether and are looking for alternatives. Well over 210,000 OSA patients have been tested and seen by SCN providers since 2019. And as of now, we have not even begun to address that deep well of patients. As of today, this overall excess in patient demand for appointments and services has us booking patients out into the latter part of February 2026. Ideally, patients should expect no more than to have to wait 2 to 3 weeks out for their next visit in order to maintain momentum and enthusiasm for treatment. So our operations and HR teams have been working very hard to expand our production capacity there in Las Vegas. As I just mentioned, we've expanded our facilities and significantly increased the size and number of our teams in order to more efficiently handle this demand with more to come. In addition, after some great work by our SCN sales staff, a local and very large cardiology practice with multiple locations has recently been referring many more cardiology patients than they were earlier in the third quarter, adding to the congestion and making the urgency of our expansion efforts even more acute. As our capacity expands and based on current trends, we anticipate that this cardiology practice could eventually refer several hundred patients per month. If that proves successful, that funnel may in and of itself become yet another avenue for us to deliver turnkey sleep disorder treatment options to large clinical groups, whether they be primary care, cardiology, neurology, pediatrics, internal medicine or even OB/GYN doctors. Each of these medical specialties regularly deals with patients who have OSA or another sleep disorder. Through our SAMC model, Vivos is very well positioned to meet those needs in a win-win relationship that is expected to be highly accretive to Vivos. So in terms of our current revenue-generating capacity in Nevada, we have been somewhat constrained to date by the number of fully licensed and credentialed dental providers on our sleep optimization teams. We currently have a number of new dentists and nurse practitioners in the onboarding process, and we expect to have sufficient providers fully licensed and well on their way to being fully credentialed in the first part of 2026. There is a usual and customary credentialing process that all new providers must go through with third-party insurance payers. We are actively working with the payers and our consultants to expedite that process, which typically takes anywhere from 2 to 6 months depending on the payer. Certain payers have recently consented to us billing out the codes we need to optimize coverage and reimbursement. So we do see progress along those lines. Now as we have been saying for some time, OSA patients who have either failed CPAP or who have just been diagnosed have been accepting Vivos treatment at high levels. This has happened despite many patients not always having full coverage from their insurance payer. In Las Vegas, for example, just under 2/3 of SCN patients who are presented with a full array of clinical treatment options choose some form of Vivos oral appliance treatment with an average dollar amount per case just over $5,000. Most patients are paying at least some of those amounts out of pocket or with the help of third-party financing. We expect that dollar value per case to rise further as we continue to add diagnostic and therapy services and as our staff gains valuable experience in explaining and presenting treatment options. As mentioned in our 10-Q filed today, we have several initiatives planned for 2026 and beyond, which have the potential to further increase the number of OSA patients we can service in both current and new markets. Such initiatives include, but are not limited to, the expansion of diagnostic and treatment services, the establishment and rollout of a pediatric OSA program and the collaboration with certain specialty medical groups like the cardiology practice there in Nevada that I mentioned earlier, who treat patients with comorbid OSA, but who lack the ability to test, evaluate and treat such patients within their existing practice environments. In addition to our acquisition model, like we have with SCN in Las Vegas, Vivos has developed and refined a new collaboration affiliation model for sleep centers not interested in being acquired outright. Under our refined affiliation model, Vivos retains full operational control over the patient experience and the provision of treatment through its managed clinical practices while collaborating with the local sleep clinic to ensure patients receive the full array of OSA treatment options. These health care delivery operations have been properly structured and reviewed by legal counsel to ensure full compliance with both state and federal health care laws. We've already put this refined collaboration model into practice. In July, Vivos executed an agreement with MISleep LLC, a Michigan sleep specialist entity engaged in sleep testing and OSA treatment in the Greater Detroit area. We expect to have this fully operational and seeing patients by the first week of December with one nearly complete sleep optimization team already trained and ready to begin seeing patients and with the potential for additional teams to be deployed in 2026 according to demand. We believe this new model corrects some of the issues we faced with our first strategic alliance in 2024 here in Denver, and we believe it will be very attractive to sleep center operators and owners who may not want to be acquired by us, but are looking to grow their business and referral networks by offering a highly differentiated treatment package to their OSA patients. Our M&A team continues to field phone calls and inquiries from both acquisition and affiliation prospects around the country. We are currently in negotiations with several potential candidates in various key markets. Given our experience with SCN, we believe these opportunities should be similarly accretive. In summary, we believe this initial success at SCN is a strong indication of the potential and upside of our business. As we roll forward, we expect to continue to modify and refine our model to make it even more efficient with the potential for even better gross margins. Furthermore, we expect that this model and in particular, our affiliation model is highly replicable and scalable across multiple markets. Although these third quarter results are early returns and without diminishing the headwinds that remain, we firmly believe this new model will continue to be highly accretive to top line revenue growth, which will, in turn, reduce our cash burn and move us closer to bottom line profitability. We believe that this methodical effort patiently executed over time has now put Vivos in a much better position to realize the full potential of our technological advantages and industry-leading products and services. And that concludes our prepared remarks. Now we'll be happy to take questions. Operator?

[Operator Instructions] Your first question comes from the line of Lucas Ward from Ascendiant Capital Markets.

Congrats on the quarter. So now that we have this acquisition in the mix, how should we model sales for the next few quarters? Like what's the growth potential?

Well, I would say, Lucas, that we expect the revenues, the top line revenues to continue to grow. We are not yet anywhere close to full capacity for our teams that are out there right now. The key element here is the addition to our teams of the dental providers and the nurse practitioners. These providers are where the -- they're the source of revenue-generating activities. And so as we now have several new doctors and new nurse practitioners in the queue, for both licensing and credentialing, then we're going to continue to see that revenue growth grow rather dramatically. And we do believe that as those providers are deployed, that what you're going to see is you're going to see the proper settling out of and sort of rightsizing between our expenses and our revenues. And as we tried to say a minute ago, we've been carrying additional expenses here even in the third quarter, we've been carrying expenses beyond what would be what I would consider steady-state operational levels. And that's just because we had to hire -- you have to hire in advance and then you deploy it and then you get the revenue boost after you deploy it that rationalizes your expenses, your cost of labor.

Okay. So okay. So there's an upfront investment in personnel and then sort of a delayed benefit in terms of revenues. Like how big is that gap? Is it a quarter or 2?

It will be -- it's a little bit of a -- there's a ramp. And that ramp is probably going to be depending on how quickly we get our doctors licensed and credentialed, it's probably a 3- to 6-month ramp. But it's not like we can't start generating revenues. In most cases, we can start generating -- we have providers in place. We just don't have the optimal number of providers. So we're leaving money on the table until we can get our provider teams built up and credentialed. And so that's where that comes. But I would say for most -- in most cases, to get to full optimized revenue levels, I would give it a 6-month ramp.

Okay. And then in terms of the additional operating expenses that we saw in this quarter, presumably some of that was sort of onetime or acquisition related. I'm just wondering like what would be reasonable in terms of operating expenses like next quarter or the quarter after?

Well, if you look at the way that we have structured these SAMC operations, our SAMC operations at steady state should be throwing off contribution margins of 50% to 60%. And so that's our model. That's what we're expecting and anticipating. And there's nothing that's happened thus far to dissuade us from that analysis. We had that analysis going in. We're now 3 or 4 months along. There's nothing that dissuades us from that. So if you -- when you get in your model, when you get to steady state and you assume contribution margins of roughly 50%, 55%, you're going to be right there with where we expect to see these things operate long term. And then as we continue to experience excess demand, we'll be expanding the number of teams in order to meet that demand in each market.

Okay. Okay. Last question on cash flow breakeven, can you give us an update on your -- kind of your goal there?

Well, our goal is cash flow breakeven. I mean, there's just no question about it. And I don't mean to be -- I don't mean to take that question lightly. But we are -- the ability to generate profit at the practice level from these SAMC centers is directly tied to our abilities to generate cash flow breakeven. Now, we have expanded our home-based infrastructure in our accounting teams, and our IT infrastructure and our personnel so that we can handle this growth. So there's been some additions to our team that are -- that we think are essential to us being able to properly manage and handle this growth. But eventually and not too far down the road, the accretion of profits and revenues from our SAMC center operations will basically turn the corner, and we will see this company get to cash flow breakeven. I hesitate to say exactly when that will happen, but the further out that we get, the more of these affiliations and acquisitions that we do, the closer we will be to cash flow breakeven.

[Operator Instructions] Your next question comes from the line of Robert Sassoon from Water Tower Research.

Exceptional quarter. A question, under the new business model and with revenues on the rise, how should investors look at the company now and in 6 months from now?

Well, that's a great question. And I think the answer to that, Robert, is that, look, we have waited for nearly 9 years in this company to actually settle in on a model that was equal to the technological advantages that our product line had. To be able to finally find that model and to monetize it, that's why we're so enthusiastic about this. But the full measure of what this model is going to do for this company is still down the road. I mean, it's still going to continue to grow. I mean, we're thrilled by these results. Don't get me wrong. But the -- the best is yet to come. And so we see this as just the very first stage of a long march towards profitability and expansion and growth because this model is replicable, it's scalable, and we can take this model and apply it in virtually any market in the United States and then beyond. So as I think about this from an investor standpoint, I mean, when you look at the valuations that our company has in the market right now and relative to what's actually happening here on the inside of this company, I think the potential for continued growth is just extraordinary. And so -- I mean, obviously, I'm biased, but I would say that as an investor, you should continue to watch for what's happening and what we report in the months and weeks ahead. What we report about how much progress we're making with new affiliations. I mean, we talked a little bit about this exciting new opportunity with medical specialty groups. We are really excited about the potential for actually working right alongside cardiology and neurology practices, in particular, because they have a very acute interest in seeing that their patients who have obstructive sleep apnea somehow find a way to get tested and treated for that sleep apnea and nobody is filling that void right now. And so we feel like we have a value proposition and a technology that can actually do that. And it's a very low-cost way for us to get -- to deploy teams and get involved with them and satisfy that need. So what I would say is that over the next 6 months, 9 months, 12 months, watch and see how many affiliations we're doing and the progress of our current affiliations as a sort of a bellwether indicator of what's to come because these deployments, these SAMC centers and these other teams that we have, all of that is highly accretive revenue, both top line and contribution margin to our bottom line. So it's really -- we finally found a way to monetize this in a very, very effective way. So I think this is really -- as I mentioned in my opening statement, I think this is a true inflection point for this company and that the future is very bright from that respect.

That sounds like a very interesting development. We'll definitely monitor that. Maybe a question to Brad. How does the recognition of revenue differ between the various models?

Great question, Robert. In the case of an acquisition like SCN, our new model allows us to capture sales at the point in time when shipment of the related product occurs as well as OSA diagnostic and treatment revenue. In the case of contractual alliances, through varying arrangements, we capture revenue from appliance sales as principal in the transaction. And depending on the agreement, either pay a fee or split gross profit or net income with sleep medical provider affiliate.

Operator, there are no further questions?

Yes, we do have no further questions at this time. So I'd like to turn the call back to Mr. Kirk Huntsman for closing comments. Sir, please go ahead.

Thank you, operator. Well, I would just like to thank everyone for joining us on today's call. And again, thank you for your continued interest in Vivos Therapeutics. This is obviously a very exciting time for Vivos as we begin to reap the fruits of our business model pivot. We look forward to sharing our continued progress with you as we continue to execute on our plans during the remainder of 2025 and into the next year. Thank you all, and have a very good evening. Thank you very much.

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