INVO Bioscience, Inc. (NASDAQ:INVO) Q2 2023 Earnings Convention Name August 14, 2023 4:30 PM ET

Firm Individuals

Robert Blum – Investor Relations

Steve Shum – Chief Government Officer

Mike Campbell – Chief Working and Vice President, Enterprise Improvement

Andrea Goren – Chief Monetary Officer

Operator

Good afternoon. And welcome, to the INVO Bioscience Second Quarter Fiscal 12 months 2023 Monetary Outcomes Convention Name. All members will probably be in listen-only mode. [Operator Instructions] Please observe this occasion is being recorded. I’d now like to show the convention over to Robert Blum of Lytham Companions. Please go forward.

Robert Blum

Nice. Thanks a lot, Kate. Good afternoon, everybody and thanks all for becoming a member of us for INVO Bioscience’s second quarter 2023 monetary outcomes convention name. Becoming a member of us on the decision at present are INVO Bioscience’s CEO, Steve Shum; the corporate’s Chief Working and VP of Enterprise Improvement, Mike Campbell; and Andrea Goren, the corporate’s Chief Monetary Officer. On the conclusion of at present’s ready remarks, we are going to open the decision for a question-and-answer session.

Earlier than we start with the occasion, we submit for the file the next assertion. Sure issues mentioned on this convention name by the administration of INVO Bioscience possibly forward-looking statements inside the which means of Part 27A of the Securities Act of 1933 as amended, Part 21E of the Securities Trade Act of 1934 as amended. And such forward-looking statements are made pursuant to the Protected Harbor provisions of the Personal Securities Litigation Reform Act of 1995. All statements relating to the corporate’s anticipated future monetary place, outcomes of operations, money flows, financing plans, enterprise methods, services, aggressive positions, development alternatives, plans and targets of administration for future operations, in addition to statements that embrace phrases reminiscent of anticipate, if, consider, plan, estimate, anticipate, intend, could, may, ought to, will and different comparable expressions are forward-looking statements. All forward-looking statements contain dangers, uncertainties and contingencies, a lot of that are past the corporate’s management, which can trigger precise outcomes, efficiency or achievements to vary materially from anticipated outcomes, efficiency or achievements. Components which will trigger precise outcomes to vary materially from these within the forward-looking statements embrace these set forth within the firm’s filings at www.sec.gov. The corporate is below no obligation to and expressly disclaims any such obligation to replace or alter our forward-looking statements, whether or not as the results of new info, future occasions or in any other case.

With that stated, let me flip the occasion over to Steve Shum, Chief Government Officer of INVO Bioscience. Steve, please proceed.

Steve Shum

Thanks, Robert. And welcome everybody. We’re excited to be on the decision at present just some days after finishing and saying what we consider is without doubt one of the most essential developments within the firm’s historical past, and one which we additionally consider targets the corporate for working money stream breakeven in 2024. The ultimate closing of the acquisition of the Wisconsin fertility Institute introduced on Friday not solely provides essential working scale to the enterprise, but additionally additional accelerates our transition from purely a medical gadget firm to a healthcare providers supplier targeted on the fertility market. And to remind everybody why this transition is essential, it offers us the power to seize a better portion of the income and revenue alternative related to remedy usually and with the remedy answer that INVOcell offers.

To place that in context and INVOcell gadget offered by itself creates income of roughly $400 per unit. A whole IVC process can generate about $4500 to $7,000 per cycle of income, with working income at scale properly in extra of the gadget revenue. This skill to seize better income and profitability scandal, whereas additionally increasing using INVOcell and the IVC process is why we’re – we stay excited by the progress being made and because the key driver behind the transition. As background, this transition began within the latter a part of 2021 with the opening of our first INVO Heart in Birmingham, Alabama. We shortly then added facilities in Atlanta, Georgia, and Monterrey, Mexico, which mixed with Birmingham recorded revenues of 712,000 through the second quarter, and a rise of 145% in comparison with the 12 months in the past interval, which equates to an annualized fee of roughly 3 million.

Importantly, these facilities are working near a breakeven level at the moment. A big accomplishment simply greater than a 12 months since operations with incremental development anticipated at these clinics sooner or later and excessive contribution margins in right here will not be on this mannequin. We anticipated, we anticipate robust profitability within the years to return. The INVO Heart development potential and profitability mannequin is why we stay up for increasing these efforts. Which brings us again to the acquisition of Wisconsin fertility, which isn’t solely extremely worthwhile, however we consider there are added development alternatives out there as we glance to combine the INVO Cell answer inside these present operations. As we’ve reported Wisconsin fertility Institute had income of greater than $5 million at their single location final 12 months with internet revenue of roughly $1.7 million. These are essential metrics for a few causes. First, it instantly doubles the prevailing run fee of our clinic operations. Second, the profitability of the clinic considerably improves our total working efficiency. And at last, it highlights the income internet revenue potential that we consider is out there with every of our present INVO Facilities.

Over $5 million and $1.5 million in internet revenue per heart is a purpose we need to obtain and all of our facilities, once they attain scale. In order we glance to the longer term, our heart growth technique will probably be to fold firm constructed facilities with our subsequent one heart open in Tampa quickly and acquisitions the place we are able to synergistically introduce INVOcell into present IVF clinics that we take possession of. The why was Wisconsin fertility Institute such a logical alternative for our first acquisition past the enticing monetary profile. First, the clinic has a superb popularity not solely in the area people, however nationally is without doubt one of the prime Fertility Facilities in America, having helped to welcome over 5000 infants since provide opening its doorways in 2007 and with roughly 550 standard IVF procedures accomplished in 2022. It’s led by an internationally famend and properly revered fertility professional Dr. Elizabeth Fritz, who shares in our imaginative and prescient and alternative to democratize fertility. We stay up for having the Wisconsin clinic and workers now a part of our operations.

With a improbable staff in place an extended established monitor file within the native market, a shared imaginative and prescient and naturally, the extremely worthwhile nature of the operations. There may be pleasure throughout on the completion of this transformative acquisition. Taking a step again to our present operations, as I discussed on the onset, our present clinics proceed to make strong progress. Income from all clinics through the quarter improved properly in comparison with final 12 months. It’s our perception that the – this ongoing progress validates the whole construct INVO Heart mannequin and idea. Additional, we’ve additionally gained vital expertise and perception from these preliminary facilities, which we consider we are able to apply to future facilities to extra shortly ramp-down.

On the subject of growth, we’re transferring nearer to opening the brand new INVO Heart in Tampa, which we anticipate to be prepared within the subsequent 60 to 90 days. We’re enthusiastic about Tampa, which we consider in a big interactive market, we’ve assembled a superb staff to function the observe, with that staff properly into coaching and planning phases in preparation for the opening. We’ll preserve you up to date on the plan opening within the coming months. We’re fastidiously evaluating timing on future INVO Facilities, particularly given our balanced efforts now between firm constructed and bought practices. We consider there are a selection of present alternatives for each going ahead.

Along with our clinics, we proceed to help service and develop in INVOcell craft present IVF clinics, to that finish product income elevated 82% through the second quarter. The important thing element that we consider will additional drive adoption is the FDA is 5x clearance we acquired to develop the labeling on the INVOcell gadget and it is incubate – indication to be used to offer for a 5-day incubation interval. This occurred in June of 2023. The outcomes display and validate the improved affected person outcomes with longer incubation time, which we consider will assist construct additional credibility available in the market across the answer. I can’t say sufficient what a big completed this was and the significance and worth this can herald our efforts to extend adoption. Importantly, with that effort now efficiently accomplished, we’ve now been in a position to remove the prior prices related to this effort on a go ahead foundation. On that observe in reference to our transition to a healthcare providers firm, we’ve carried out additional company expense reductions, which when mixed with the worthwhile acquisition, the continued enhancements in our present INVO Facilities and the 510(ok) price reductions considerably improves our working image and can lead us to a shorter timeframe to achieve an total adjusted EBITDA revenue which once more we’re concentrating on in 2024.

With that, let me flip this over to Andrea to shortly cowl added monetary particulars. Andrea?

Andrea Goren

Thanks, Steve. Income for the quarter totaled roughly $316,000 in comparison with roughly $146,000 within the prior 12 months interval, roughly 81% of Q2 income or $254,000 consisted of consolidated service income from our Atlanta INVO Heart compared to $112,000 within the prior 12 months interval. The remaining 19% represents product income from in INVOcell gross sales to IVF clinics. As a reminder, our working INVO Facilities in Birmingham and Monterrey are accounted for utilizing the fairness technique.

Income from all three clinics totaled $712,000 within the quarter in comparison with $291,000 within the prior 12 months interval. The rise in income displays the cumulative impression of promoting efforts to construct consciousness for the clinics, their respective providers, and INVOcell and IVC usually. We anticipate 2023 clinic income to proceed to construct all year long, primarily from the inclusion of the Wisconsin clinic outcomes and to a lesser diploma from the launch of our Tampa INVO Heart. Each clinics are wholly owned and will probably be – excuse me, and will probably be consulted into our monetary statements.

Mirror our transition from medical gadget firm to fertility service supplier. From this quarter onwards, price of income is offered within the working expense part of our revenue assertion. Our working bills decreased to roughly $2.4 million from roughly $2.8 million within the prior 12 months interval, largely on account of decrease personnel advertising, non-cash inventory based mostly compensation, and analysis and improvement prices. Working Bills attributable to Atlanta IVNO Heart had been roughly $275,000 in comparison with roughly $186,000 within the prior 12 months interval. On a mixed foundation, our three inverse facilities had roughly $799,000 in working bills, in comparison with roughly $680,000 of the prior 12 months interval.

Our adjusted EBITDA loss which is internet of non-cash prices, primarily associated to fairness based mostly compensation improved to roughly $1.6 million in comparison with an adjusted EBITDA lack of roughly $2.2 million final 12 months. These quantities included a acquire of roughly $4,000 and the lack of roughly $118,000 respectively, attributable to our INVO Heart joint ventures accounted for with the fairness technique. With the inclusion of Wisconsin, together with a latest expense reductions Steve talked about, we anticipate to attain additional enhancements in our EBITDA efficiency transferring ahead.

On June 30, 2023, we had roughly $112,000 in money and $1.3 million in debt. We’ve since repaid roughly $140,000 of convertible debt within the quarter we raised roughly $4.5 million in gross proceeds in a public providing of widespread inventory and warrants. Upfront of the providing we carried out a 1 for 20 reverse break up, which allowed us to regain some shoppers below NASDAQ’s minimal bid value necessities. As of at present, we’ve roughly 2.4 million shares of widespread inventory, and roughly $3.5 million warrants excellent. Again to you, Steve.

Steve Shum

Thanks, Andre. Earlier than we open on your questions, let me summarize. As highlighted, we consider the latest occasions in progress has considerably improved the corporate’s operations on a go ahead foundation. We finalized and closed a significant acquisition including significant income and working income. Our present facilities have gotten self-sustaining and we anticipate additional development. We concluded our FDA medical efforts with a really profitable consequence that additional validates this success of INVOcell, and we are able to now remove these prices transferring ahead. We’re near the opening of the brand new INVO Heart in Tampa, which can present an added development and we are going to search out extra acquisitions to additional assist speed up constructing added scale in our operations.

We consider we’ve now transitioned past only a medical gadget know-how firm and promoting the INVOcell gadget. We’ve now turn out to be an built-in clinic firm targeted on providing remedy options to sufferers inside the giant and rising fertility market. We anticipate our enhanced business method will even naturally enhance the utilization and develop in INVOcell and the IVC remedy course of inside the market. We consider our efforts together with our know-how put us in a singular place. And we’ve set the inspiration from which we consider we are able to drive shareholder worth.

With that, we are going to open up for questions. Operator?

Query-and-Reply Session

Operator

Thanks [Operator Instructions] The primary query is from Michael [indiscernible] of Maxim. Please go forward.

Unidentified Analyst

Hey, guys. Congratulations on the progress this quarter and thanks for taking my questions at present.

Steve Shum

Thanks, Michael.

Unidentified Analyst

So I might wish to see in the event you may develop a bit bit extra on the significance of gaining that 510(ok) clearance for the 5-day incubation interval. Clearly, this can be a actually essential improvement. However are you able to speak a bit about how this modifications your aggressive messaging if you end up speaking to potential sufferers, and they’re evaluating in each cell versus conventional IVF?

Steve Shum

Sure. Certain, nice. Nicely, as a reminder, everybody, our unique clearance for the gadget was for a three-day incubation interval, which is analogous to IVF has decrease outcomes, affected person outcomes success charges. And in order we’ve been within the market, we’ve to message advertising sensible and so forth to each physicians in addition to sufferers, what our label approval was for and the outcomes of that. So, what we regularly discovered available in the market was that it was actually, the comparability that was typically occurring was evaluating standard IVF remedy, which was typically being performed at five-day, in comparison with our three-day wait to the label approval. Despite the fact that a lot of our early adopters of the know-how had been utilizing our gadget off-label and incubating for 5 days, which is why we had a quantity of information that we may use to – actual world information that we may use to help a 510(ok) submission for label enhancement. So, the benefit of getting gone by that multi-year course of is that now we are able to higher mirror our know-how that we’ve lengthy identified, has a greater consequence fee just like IVF, then you may incubate for an extended time frame. And so in our minds, it actually helps to equalize the taking part in area within the market. So, I’d say it’s in our thoughts, it’s very vital. It’s why we went by that multi-year effort to attain that enhance labeling for the gadget. And now we are able to converse extra brazenly and actively to each sufferers, in addition to physicians, and mirror validated information to them that demonstrates the upper high quality outcomes for sufferers based mostly on a five-day incubation interval. So, once more, it’s very vital for our advertising efforts. We predict it’s very vital for probably partnering with physicians, to staff up with us whether or not we’re doing – constructing new INVO facilities, or probably acquisitions, so it has significance in lots of facets of the enterprise for us.

Unidentified Analyst

Alright, sure. And so truly, I do wish to follow-up a bit bit on that final level you make and simply in the event you may discuss how the five-day incubation approval, the way you anticipate that to learn the clinics, or is that this extra about attracting new practitioners, new clinics, or do you see that is one thing that may truly profit your present clinics and their development charges?

Steve Shum

I feel it’s massively helpful to our present clinics, once more, they will now – even clinics themselves need to watch out about how they’re advertising a know-how by way of its official labeled utilization. So, now, our personal facilities and our physicians inside these facilities can do extra proactive advertising to sufferers and we predict that could possibly be very instrumental in serving to to draw additional construct consciousness across the know-how and convey a better quantity of sufferers into the clinic. As a result of clearly, for sufferers, a profitable consequence is without doubt one of the most essential drivers of their minds, in fact, their skill to afford the remedy is essential too, however they wish to, as we all the time say, internally, and an important factor is having a profitable consequence and having a child. So, with the ability to, once more, do larger image advertising that may display these outcomes extra proactively, we predict could possibly be a really vital driver once more in bringing extra site visitors and extra affected person quantity into the clinics. I believed that Mike Campbell even add to that. I simply most likely received some ideas on that too, go forward Mike.

Mike Campbell

Sure. Simply briefly, Michael, I imply we’re at a big drawback competitively as a result of our rivals, who’re the IVF clinics are telling their sufferers that the INVO cell know-how is barely 29% profitable and their outcomes with standard IVF 50% plus. And once more, for the FDA, these had been 29% was the day-three information that was permitted for the label. And so there’s a false impression available in the market, that our know-how is considerably inferior, when in reality, it isn’t. So, now we’re lastly in a position to put the true information on the market in entrance of the group. And once more, this can be a affected person pushed market, it’s crucial that sufferers perceive that this know-how delivers the identical consequence for final mile.

Unidentified Analyst

Sure. No, it’s actually a key level right here. After which simply I suppose seeking to your breakeven 2020 [ph], may you develop on what kind of assumptions go into that? Does this an element any extra clinics? What degree of development are present clinics are factored in there? And how much price financial savings do you have a look at if you end up making that analysis?

Steve Shum

Certain, nice query. So, what our key assumptions are is that we’ll get some incremental development out of Wisconsin off of its present baseline as we combine in each. So, we aren’t making an attempt to be too aggressive there. Simply seeking to deliver the know-how in and add some affected person quantity into that observe as we go into subsequent 12 months. Clearly, bringing Tampa up and working right here this 12 months, we anticipate to be an element and benefiting that purpose for subsequent 12 months. After which in fact, our present facilities staying on the identical trajectory. That’s actually the important thing parts. We aren’t even factoring in extra acquisitions. We do assume there are potential extra acquisitions, however which might solely assist us speed up and get there sooner in our minds, nevertheless it’s not a part of how we see the plan to do it with simply what I simply laid out from a income standpoint and development standpoint. After which on the associated fee discount aspect, we’ve already carried out these. Once more, that basically was occurring to start with of the present quarter that we’re in as we concluded the 510(ok) prices, after which we made another company changes. So, we’ve taken some prices out of the enterprise to have the ability to extra targeted. Now, in fact, we’re going to be including within the Wisconsin operation. So, from an absolute standpoint, there will probably be extra substance to the enterprise. And they’re form of prices, however bear in mind, they’re worthwhile. So, once we have a look at what we’ve taken out prices from form of the company aspect and people had been fairly significant between the 510(ok) prices and a number of the different company prices we’ve decreased. These are – we’d most likely – I’d say at ballpark that about 30% of the company prices have been decreased. And we anticipate to keep up these ranges as we go into subsequent 12 months.

Unidentified Analyst

Alright. Thanks very a lot.

Steve Shum

Thanks.

Operator

[Operator Instructions] This concludes our question-and-answer session. I wish to flip the convention again over to administration for closing remarks.

Steve Shum

Nice. Thanks everybody that joined the decision at present. We respect your time. As all the time, please don’t hesitate to achieve out when you have any follow-up questions. Thanks once more.

Operator

The convention has now concluded. Thanks for attending at present’s presentation. It’s possible you’ll now disconnect.