Good day, everyone, and welcome to the Vivos Therapeutics Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time participants are in a listen-only mode. A question-and-answer session will follow management’s remarks. 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 for the next 30 days. I will now hand the call over to Julie Gannon, Vivos' Investor Relations Officer for introductions and the reading of the Safe harbor. Please go ahead.

Thank you, operator. 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 us on today's call are Kirk Huntsman, Vivos' Chairman and Chief Executive Officer; and Brad Amman, Chief Financial Officer. Today, we'll review the highlights and financial results for the fourth quarter of 2022, as well as more recent developments and Vivos' plan for the remainder of 2023. Following these formal remarks, we will be happy to answer your questions. Words such as aim -- oh, I'm sorry, I would also like to remind everyone that today's call will contain certain forward-looking statements from our management, made within the meaning of Section 27A on 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 and variations of such words and similar expressions are intended to identify as 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, product acquisition and integration, research and development, regulatory initiatives, cost savings plans and plans to generate revenue, as well as potential results of operations and operating metrics 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 in 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, 2022, which was filed with the SEC today, and our other filings with the SEC, all of which will be accessible on the Investor Relations section of the 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 Vivos appliances 510(k) clearance to treat mild to moderate OSA in adults. Any reference herein regarding Vivos' treatment or the Vivos' treatment method should be viewed in this context. Treatment of patients with severe OSA are performed off label, at the sole discretion of the treating doctor and are not part of the Vivos treatment protocol. Now at this time, it is my pleasure to introduce Kirk Huntsman, Chairman and CEO of Vivos. Kirk, please go ahead.

Thank you, Julie. I want to thank you all for joining us on today's conference call. In just a moment, I'll turn the call over to our Chief Financial Officer, Brad Amman, who will walk you through the highlights of our fourth quarter and full year 2022 financial and operating results. Once Brad is finished, I'll come back on and speak with you about the latest developments at Vivos. First, I'll quickly talk about 2022; the challenges we faced, including the revenue recognition review process that ate up so much of our time last year. And then I also briefly mentioned some of what we accomplished in spite of these headwinds, including actions we took to broaden our product offerings and distribution channels, and importantly, to increase operational efficiencies and improve our cost structure, in order to work more efficiently with dentists and medical professionals in a post-COVID-19 world. Then I'll take a few minutes to talk about 2023, what we've already been able to achieve in just a few months and what we expect to accomplish during the rest of the year. This includes our recent acquisition of product rights and patents from Advanced Facialdontics, which has expanded our product line -- our product portfolio, as well as our revenue potential by opening Vivos up to a much broader patient base. After that, we'll be happy to take your questions. Now let me turn it over to Brad to review our financials. Brad, please go ahead.

Thank you, Kirk, and good afternoon, everyone. Today, I'll review the financial highlights of our fourth quarter and full year 2022 financial results. For information on our results for the 12-month period ended December 31, 2022, I'll refer you to our earnings release which was distributed earlier today, and our annual report on Form 10-K, which will be available on the SEC filings portion of the Investor Relations section of the Vivos' website at www.vivos.com/investor-relations. Today, we reported fourth quarter 2022 total revenue of $4 million compared to $4.4 million for the fourth quarter of 2021. The overall year-over-year decrease was due in part to total lower revenue from Vivos' Integrated Provider or VIP enrollments. On a positive note, we saw increased product revenue during the quarter as well as increased revenue generated year-over-year from Billing Intelligence Services, oral facial myofunctional therapy known as OMT, and increased sleep testing service revenue. It is critical to note that a material portion of the decrease in VIP enrollment revenue, reflects a deferral of approximately $2.5 million of VIP enrollment revenue into future periods under our new revenue recognition policy. We expect to recognize all of this revenue over the next 17 months, as we fulfill our obligations under our VIP contracts. In fact, our actual VIP enrollments were up 43% in the fourth quarter with 50 VIPs enrolled versus 35 enrolled in the same period last year. But our new policy has the net effect of recognizing a significant amount of VIP enrollment revenue over time, which for this year only creates a bit of an apples and oranges effect for comparison purposes. Our revenue recognition policy also has the effect of allocating enrollment revenue to other service and product revenue categories, based upon various performance obligations included in the enrollment contracts.…

Thank you, Brad. As I mentioned earlier, in many ways, 2022 was a challenging year for Vivos. As Brad just discussed, our reported GAAP revenue was down slightly year-over-year as we confronted a number of challenges. As we previously noted and expected, a material portion of that revenue decline was due to our new ASC 606 revenue recognition policy. Otherwise, the biggest issue we faced was the lingering effects of pandemic-driven dental workforce disruptions, which corresponded to fewer patients walking through dentist stores. Combined with an economy reeling from inflationary pressures and higher interest rates, these issues were pervasive in their impact on our business in 2022. I talked at length about these issues on our last conference call, so I won't rehash them here again in any detail. Aside from these short-term challenges and in some ways as a result of having faced them, in 2022 and early 2023, we have achieved several significant accomplishments. We believe these accomplishments have laid the foundation for Vivos to move forward in a more focused and productive way. Suffice to say that largely because of that adversity, we seize the opportunity to refine our strategy and transform our business model in very important ways. We believe those challenges will allow us to diversify beyond our previous reliance on the dental industry, while enabling us to more rapidly scale our business going forward. Here are the primary changes we've made and accomplishments we've achieved in laying the foundation for our future growth. I'll run down this list quickly and then elaborate on each of them further thereafter. Number one; over the course of 2022, we cut our cash burn by more than half, with further reductions anticipated ahead. From Q3 to Q4, our cash burn was reduced by more than $2.7 million. Number…

[Operator Instructions] Our first question is from the line of Scott Henry with ROTH Capital Partners.

Kirk, you covered a lot of ground there. Just a couple of questions. First, with regards to VIPs, I recognize that the revenue will be spread over a larger time period, which will eventually annualize, and it will be similar. But that VIP add number of 50 in fourth quarter, do you think that's a representative number of what you would expect to add quarterly going forward, or what types of adds should we be thinking about on a quarterly basis knowing there will be some volatility?

Yes. I would say we do have some seasonality in our enrollments and the fourth quarter tends to be a little better. The first quarter tends to always be a little softer, but -- and that's been true here in the first quarter of the year. But this is -- they don't drop off dramatically. There's just some fluctuation that goes on throughout the year. I think what you're going to find, Scott, is because of the way we've restructured, so doctors -- we used to be a very binary organization. We had -- you either paid the full upfront initiation fee or enrollment fee, which was somewhat of a barrier for some of these doctors, it was $45,000 for these guys to get all the training that they needed. Now we've got multiple levels and multiple ways that these doctors can participate, and that they can begin to generate revenue for themselves, their practices right away. So we have multiple layers or levels of entry points at various prices, so that there's really no reason for people to walk away from an event with us, or walk away from any type of an exposure to Vivos here, and not participate at some level. We have very inexpensive ways now for doctors to do that. If they want the full measure of what we have to offer, that VIP program is still available. But I think what we're going to find is, is that the numbers of VIP doctors is going to continue to rise. We're having some great success with our DSOs. That tends to add a lot of doctors in more of a cost-effective way. And so I think what we're going to see, is that number is going to accelerate as we go through 2023, because we'll have the -- we'll have a lot of doctors that hesitated or delayed getting involved with Vivos, because they really didn't want to pay for all the training that's required. Now they can get limited access with limited training, they can get a -- put a toe in the water, and that's actually -- we're seeing a lot of interest and a lot of growth in that area. So I think the numbers are going to get better, as we go throughout 2023 because we just here mid-quarter rolled out that new program and it's been very well received. So we're starting to see some good positive signs there. It's too early to tell exactly what the impact will be. But we think with lower -- with multiple ways and multiple price point levels to participate, I think that we're going to see that number go up.

Okay. And then appliances was kind of flat quarter-to-quarter sequentially, third quarter to fourth quarter. How do you find utilization per dentist? How should we think about that trend? Should we think about it flat or just with more dentists driving the number, or do you think you'll get some more gains, as far as appliance per dentist?

So that's a great question. And buried in our monologue that we just gave you guys, there was a statistic or an event that we reported on. We overhauled our training and we rolled this training out and then measured the productivity of the attendees. This was initially rolled out last September. We measured the three months prior. We measured the three months after training, and this new training yielded a threefold increase in doctor productivity. We're very excited about that. Now we're going to continue with those type trainings. We take those trainings on the road typically, so that we can reach dentists on the East Coast, north, south, east and west. So we don't require dentists to come to Colorado for that. We take that out on the road. But the relaxed and more specific focused training that we've rolled out is yielding some very important and very significant increases in productivity. So I would say doctor productivity as we get more of our doctors through that process, doctor productivity should be up higher than what it was last year.

Okay. And then the acquisition that recently took place, how should we think about the magnitude of revenue gains there in the time line of realizing those revenue gains?

Well, we are -- I'll just tell you this, we are extremely excited about this new technology. The impact that it will have, I think, on our business will be profound. And we think -- we see the introduction of a low cost, easy to use, easy to deliver products such as the POD to be a central part of our appeal to DSOs to the DME companies, to other groups that we -- that allow us to scale our business more rapidly. When we go after onesie-twosie dentists and we get one dental office at a time, it's hard to scale that in a meaningful way, in a short period of time. When we have larger groups or we have companies such as DME companies with vast numbers of patients, the simplicity of training a dentist to do a POD device delivery, for example, with a patient, we can do that training in about two hours. It takes us at least three days of live training and probably another 12 hours of online training to get our doctors ready to deliver and produce with our care devices. So the simplicity and the immediate profitability of the PODs are very appealing to the dental market. They've got vast numbers of patients that can use them and use them well. And so we're very excited about what that's going to mean, and I think it's really -- honestly, I think it's a bit of a game changer because of the way that it allows us to go more broadly and deeper into the market that we all know is just -- that they're just screaming for something if they fail CPAP, they have nowhere to turn except a surgical operation, and that's just really for most patients, not really on the table. So operator, are there any further questions?

Yes, we do have one. Our next question is from the line of Lucas Ward with Ascendiant Capital Markets.

Congratulations on your progress. So I wanted to ask about these institutional partnerships. You've got the DSOs and the DMEs, and it sounds like there's just massive business there. So I'm wondering like, what are the bottlenecks, like how long does it take to close these deals? And once you do get a major DSO or a DME on board, is it -- does it just open the floodgates or is this something that we can model?

Okay. That's -- Lucas, that's a great question. Let me -- so I'll remind everyone that back in 1995, I was one of the very first individual entrepreneurs that started the DSO industry. I watched that industry grow, I'm familiar with the players in it. And I cautioned everyone, when we launched our DSO initiatives, because I know these guys. They're very, very cautious from an operational standpoint, introducing anything into -- anything like what dental sleep medicine entails into a dental practice. It requires a great deal of patients, a great deal of commitment and a great deal of energy and time by the DSO. So we never really expected the DSOs to be any sort of an immediate sort of revenue panacea. Having said that, we're making huge strides there. We have had some amazing success stories that are just really stunning in their -- in the way that they're delivering services to patients within the DSOs. And we're gaining a lot of traction. In fact, I have people right now at the largest annual DSO conference going on right now in Orlando. But we are -- we really think that, that's a little bit of a slow burn. The opportunity there is huge. But it's a little bit of a slow burn. The DSOs are just very cautious and very careful. Several of them have been burned by trying to implement fleet programs into their organizations in the past. And they've never had a company like Vivos that has solved all the barriers to entry. So it's proceed with caution with those guys, and it's going to take a little bit of time. But once they flip the switch, once they realize and they are starting to realize how big this opportunity exists, they will come on…

Okay. I just had a couple of financial questions, possibly for Brad or whoever wants to take it. Can you say what your revenues in the fourth quarter would have been, without the revenue recognition change? So instead of $4 million, would it have been $5 million or higher?

Yes, it's very difficult to look at it like on a quarter-over-quarter basis, we talked about $2.5 million moving from recognition of revenue into deferred revenue, and -- but that will be recognized at some point in time. So it's not like that revenue goes away, that revenue just gets deferred. We used to recognize revenue over 12 months, and now it's up to 18 months on the longest piece. So it's more of a deferral program than it is anything else.

Okay. Clear. And then with respect to operating expenses, I was wondering if you could give a little color there? It looks like the sales and marketing was up sequentially quite a bit, although you were down a little on G&A. I'm wondering sort of what the trend is likely to be for 2023 on -- well, just operating expenses overall. Let's say we did $35 million this year, like do you expect that to grow in 2023? And if so, like roughly how much?

Well, we've been focusing on our cash burn and operating expenses and G&A are obviously a big part of that. We had 180 employees in 2021, and now we ended the 2022, it's about 160, and we are looking at other ways to save costs in terms of outsourcing some personnel to save some costs there. But we're really focused on the cash burn. And if you look at the cash burn in first quarter, the whole quarter or first quarter of 2022, we burned $6.2 million of cash. And in the fourth quarter, we burned $3.3 million of cash. In third quarter, we burned $6 million. So we were down just about half of our burn, between third quarter and fourth quarter. So we saved $2.7 million. So we're looking at things on a basis of what do we need to scale. We're driving top line revenue and looking at the expense line item, so we can start to improve the bottom line as well.

There are no further questions at this time. I would like to turn the floor back over to Kirk Huntsman, Chairman and CEO, for closing comments.

Thank you, operator. I would like to thank everyone again for joining us on today's call and for your continued interest in Vivos Therapeutics. We look forward to sharing our continued progress with you in the future. Thank you, and have a great evening.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.