Executive Summary / Key Takeaways

• Transformational Pivot Underway: Vivos Therapeutics is executing a critical strategic shift from a legacy dentist-centric VIP model to direct alliances and acquisitions of medical sleep centers, aiming to directly access thousands of Obstructive Sleep Apnea (OSA) patients at the point of diagnosis.
• Differentiated Technology & Patient Preference: The Vivos Method, with its FDA-cleared, non-invasive, and rehabilitative oral appliances, offers a compelling alternative to CPAP and surgery, demonstrating high patient acceptance rates (70-80%) and the potential for non-lifetime intervention.
• Early Operational Success & Strong Economics: The recent acquisition of The Sleep Center of Nevada (SCN) shows promising early results, with patient demand exceeding capacity and Sleep Optimization (SO) teams projected to generate over $500,000 in monthly net collections per team with over 50% contribution margins.
• Path to Cash Flow Positive: Management targets achieving cash flow positive operations by Q4 2025, driven primarily by revenue growth from the new model, which is expected to yield significantly higher revenue and gross profit per case.
• Execution Risk & Liquidity Focus: While the new model holds substantial upside, execution risks related to integration, labor, and regulatory compliance, coupled with current liquidity constraints and high-cost debt, necessitate careful monitoring of future financing and operational ramp-up.

The Airway Revolution and Vivos's Strategic Reawakening

The landscape of sleep medicine is undergoing a profound transformation, driven by a growing understanding of Obstructive Sleep Apnea (OSA) and a demand for more patient-friendly, effective treatments. Vivos Therapeutics, Inc. (NASDAQ:VVOS) stands at the forefront of this shift, offering a proprietary suite of non-invasive oral appliances designed to address dentofacial abnormalities and mild to severe OSA in adults, and moderate to severe OSA in children. The market opportunity is substantial, with over 2,500 AASM accredited sleep labs across the United States diagnosing more than 100,000 new OSA patients each month. This vast patient pool, often dissatisfied with traditional therapies, represents a fertile ground for Vivos's innovative approach.

Vivos's journey began with BioModeling Solutions in 2007, evolving through a reverse acquisition in 2016 to become Vivos Therapeutics. For years, the company's business model centered on training and supporting dentists through VIP enrollment programs. While this built a foundation of over 2,000 trained dentists and treated nearly 59,000 patients by June 2025, it proved challenging to scale broadly. This historical context informed a critical strategic pivot initiated in 2024 and accelerating into 2025: a decisive shift away from the dentist-centric VIP model towards direct contractual alliances and outright acquisitions of medical sleep specialty providers and sleep testing centers. This new strategy aims to directly engage patients at the crucial point of diagnosis, capturing higher-margin product and service revenues and fundamentally reshaping Vivos's growth trajectory.

Technological Edge: The Vivos Method's Differentiated Approach

At the heart of Vivos's investment thesis lies its core technology: The Vivos Method. This non-invasive, non-surgical, non-pharmaceutical, and multidisciplinary treatment modality utilizes proprietary oral appliances such as the patented DNA, mRNA, and mmRNA devices, as well as the Vivos Guide and PE x appliances. These customized appliances are designed to treat maxillofacial and developmental abnormalities that contribute to breathing and sleep disorders.

The tangible benefits of The Vivos Method offer a compelling alternative to existing treatments. Unlike continuous positive airway pressure (CPAP) or neuro-stimulation implants, Vivos's typical course of treatment is limited to 12 to 15 months, with the possibility of not needing lifetime intervention. This significantly enhances patient convenience and adherence. Furthermore, out of approximately 58,000 patients treated worldwide, the company reports "very few instances of relapse," underscoring the long-term efficacy of its approach. The Vivos Method has garnered significant clinical credibility through its FDA 510(k) clearances for mild-to-severe OSA and snoring in adults, and more recently, for moderate-to-severe OSA in children aged 6-17. The issuance of new insurance codes by the American Medical Association, unique to Vivos products, further solidifies its position, although the precise reimbursement levels from payers are still being established. For investors, this technological differentiation creates a strong competitive moat, enabling Vivos to offer a patient-preferred solution that can command higher value, contributing to improved margins and market positioning in its new strategic model.

Competitive Landscape: Disrupting the Status Quo

Vivos operates in a competitive medical device market for sleep disorders, primarily contending with established players offering CPAP devices, oral appliances, and surgical implants. Key direct competitors include ResMed (RMD), Philips (PHG), Inspire Medical (INSP), and SomnoMed.

ResMed and Philips are dominant forces, primarily offering CPAP devices and broader respiratory care solutions. ResMed, with its established global distribution and digital health platforms, boasts consistent revenue growth and strong profitability (ResMed's TTM Gross Profit Margin: 59%, Operating Profit Margin: 33%). Philips, a diversified healthcare technology company, also shows steady growth and enhanced profitability in its health tech segments (Philips' TTM Gross Profit Margin: 43%, Operating Profit Margin: 3%). Both companies benefit from scale and extensive R&D. However, Vivos's non-invasive, rehabilitative approach directly challenges the compliance issues often associated with CPAP masks, which can be cumbersome and uncomfortable for many patients. Patient preference is a significant differentiator, as Vivos finds that "most people do not want CPAP, and they will choose something other than CPAP when it's presented properly."

Inspire Medical focuses on implantable neurostimulation devices for OSA, demonstrating rapid revenue growth from its surgical solutions (Inspire Medical's TTM Gross Profit Margin: 85%, Operating Profit Margin: 4%). While Inspire offers a highly effective solution, Vivos's non-surgical method presents a less risky and more accessible option, potentially leading to faster recovery times and broader appeal. SomnoMed, a specialist in oral appliances, is a closer competitor, but Vivos's multidisciplinary Vivos System potentially offers a more comprehensive approach for complex dentofacial issues. Vivos's FDA clearances for severe OSA in both adults and children, coupled with unique CPT codes, enhance its clinical credibility and differentiation against these rivals.

Despite these advantages, Vivos faces competitive disadvantages due to its smaller scale, which can lead to higher operational costs and potential technological gaps in advanced monitoring compared to larger, more resource-rich competitors. Its previous reliance on a dental network also proved less efficient than the established distribution channels of its larger rivals. Indirect competitors include pharmaceutical treatments, lifestyle interventions, and wearable sleep trackers. These alternatives, particularly AI-driven diagnostics, could offer more accessible or cheaper options, potentially eroding Vivos's market share if not addressed by its direct medical integration strategy. Vivos's strategic response is to leverage its unique technology and patient preference by integrating directly into the medical sleep community, positioning itself as a superior, rehabilitative solution within a high-volume, low-margin industry.

The Strategic Pivot: From Dentists to Sleep Centers

Vivos's strategic pivot is a direct response to the limitations of its legacy business model. The company recognized that relying on VIP enrollment revenue and broad dentist adoption was not the fastest or most efficient path to scale. First quarter 2025 service revenues declined significantly, with VIP enrollment revenue dropping by 88.9% year-over-year to $130,000, as the VIP enrollment sales team was eliminated. This deliberate de-emphasis on the dental community as the primary growth driver, following disappointments with DME and broad DSO initiatives, paved the way for a more impactful strategy.

The new model focuses on contractual alliances and outright acquisitions of medical sleep specialty providers and sleep testing centers. This approach allows Vivos to directly access thousands of newly diagnosed OSA patients at the critical juncture of treatment decision-making. Initial learnings from the Rebis Health alliance in Colorado, while slower than anticipated due to internal issues at Rebis, validated the core thesis: 71% of patients presented with Vivos as an alternative to CPAP selected some form of Vivos treatment, at an average revenue per case exceeding $4,500. This crucial insight led Vivos to refine its collaboration model to ensure greater operational control, aiming for more predictable and rapid ramp-ups in future ventures.

Operational Execution & Financial Performance: Early Success and Investment for Growth

The acceleration of Vivos's new strategy was dramatically underscored by the June 10, 2025, acquisition of The Sleep Center of Nevada (SCN), the largest sleep center operator in Nevada. This "transformational" acquisition, valued at $8.7 million (comprising cash, restricted common stock, and contingent earn-out consideration), provides Vivos with seven operating locations and direct access to approximately 3,000 new sleep patients per month. The SCN acquisition is designed to capture diagnostic and consulting revenues, representing new, higher-margin streams, in addition to driving Vivos appliance sales, all while complying with corporate practice of medicine laws.

Early operational results from SCN are highly encouraging. For the period of June 11-30, 2025, SCN contributed $0.5 million in revenue and $0.1 million in net income, a strong start that does not yet reflect appliance sales to SCN patients, which are expected to begin in Q3 2025. Patient demand at SCN has already "outpaced our capacity to service them," with Vivos currently servicing "significantly less than 40%" of potential new patients. To meet this demand, Vivos is deploying specialized Sleep Optimization (SO) teams, each comprising approximately 16 medical, dental, and support staff. The company currently has 1.5 SO teams deployed across two SCN locations and plans to deploy two additional SO teams in Q4 2025, bringing the total to 3.5 teams by year-end. A fourth SO team is planned for Q1 2026, with the potential for SCN's markets to support up to eight teams. Each fully operational SO team is projected to process approximately 250 patients per month, potentially generating over $500,000 in monthly net collections with contribution margins above 50%. While an initial ramp-up of up to 60 days is anticipated for teams to become fully functional, and up to five months for net revenue collections to match activity, the early indicators are robust.

Vivos's Q2 2025 financial performance reflects this strategic transition. Total revenue decreased 6% year-over-year to $3.82 million. Product revenue saw a 4.6% decline to $1.885 million, primarily due to higher appliance discounts, though this was partially offset by a 114.8% increase in guide sales to $857,000. Service revenue decreased 6.9% to $1.935 million, largely due to the expected 88.9% drop in VIP enrollment revenue to $130,000. However, this decline was significantly mitigated by a 165.4% surge in sleep testing services revenue to $844,000 (driven by SCN) and a 171.4% increase in sponsorship/seminar revenue to $608,000.

Gross profit decreased 20.4% to $2.11 million, with gross margin contracting to 55% from 65% in Q2 2024, reflecting the shift in revenue mix and higher costs associated with diagnostic services and patient therapy. Operating expenses increased substantially by 52.1% to $6.975 million, primarily due to $1.8 million in SCN acquisition and integration costs. This resulted in a widened operating loss of $4.865 million for the quarter. For the first half of 2025, total revenue was $6.835 million (down 8.5% YoY) and net loss was $8.877 million.

Despite these short-term impacts, the full year 2024 demonstrated positive trends, with total revenue increasing 9% to $15.03 million, product revenue up 26% to $7.9 million, and operating expenses declining 21% to $20.19 million. This led to a 35% reduction in operating loss to $11.17 million for the year. The company also strengthened its liquidity in 2024 by raising $17.9 million through equity transactions, including a $7.5 million investment from New Seneca Partners, which helped address Nasdaq's minimum stockholders' equity requirements. As of June 30, 2025, Vivos held $4.4 million in cash and cash equivalents, but with total liabilities of $21.5 million, management acknowledges this is "insufficient to fund operations" over the next twelve months without additional financing, raising "substantial doubt" about its going concern status. The SCN acquisition was financed through an $8.2 million senior secured term note (net proceeds $7.5 million) and a $3.7 million equity private placement from V-Co 2.00 (an affiliate of Seneca Partners). Management recognizes the current debt is "very much on the expensive end of the scale" and is actively seeking to reduce its cost of capital as the new model matures.

Outlook & Guidance: A Clear Path to Profitability

Vivos's management is "extremely encouraged" by the early results from SCN, viewing these "strategic moves as setting the stage for stronger performance in the upcoming quarters." The company has a clear, ambitious outlook: to achieve cash flow positive operations by the fourth quarter of 2025. This target is underpinned by the rapid deployment and ramp-up of SO teams at SCN and other locations. Management projects that every 1,000 newly diagnosed OSA patients exposed to Vivos treatment options per month could generate approximately $38 million in annual top-line revenue (with approximately $19 million net) from about 700 new case starts, each averaging $4,500 or more with strong 50% contribution margins. This revenue-driven path to profitability is expected to be "more on the revenue side than cost cutting side" going forward, as the company invests in scaling its operations.

Beyond SCN, Vivos is actively building an M&A pipeline, with several potential acquisition targets and affiliation prospects under negotiation, including one under an exclusive letter of intent. The company's first management agreement under its revised collaboration model with MI Sleep, LLC in Detroit is also expected to deploy its first SO team in Q4 2025. Management's extensive prior experience in scaling professional practices provides confidence in the replicability and accretive nature of this new model. The company anticipates 2025 to be "substantially materially better than last year" in terms of overall revenue.

Risks & Challenges: The Road Ahead

Despite the promising outlook, Vivos faces several pertinent risks and challenges. The new business model, while showing early promise, is still "unproven and may not produce the benefits we anticipate," making future prospects difficult to evaluate. The integration of SCN's operations may prove "more difficult, costly, or time-consuming than expected," potentially disrupting ongoing business and affecting patient and employee relationships. Operational constraints at SCN, including limited physical space, the need for extensive provider and staff recruitment and onboarding, and "customary issues with third party provider credentialing," could slow the revenue ramp.

Regulatory risks, particularly concerning "corporate practice of medicine (CPM) laws" and fee-splitting regulations, could adversely impact Vivos's ability to operate its managed medical practices in certain states. Furthermore, the labor-intensive nature of the business, especially with the deployment of SO teams, exposes Vivos to risks related to recruiting qualified talent, managing labor costs, and addressing potential shortages. Liquidity remains a critical concern, with current cash deemed insufficient for the next twelve months, necessitating further financing. The high cost of the current senior secured debt also presents a financial burden, and while refinancing is a goal, there are no assurances of favorable terms. Finally, the uncertainty surrounding the reimbursement levels for Vivos's new CPT codes could impact future revenue projections, and the company continues to work with payers to establish these.

Conclusion

Vivos Therapeutics stands at a pivotal juncture, having strategically pivoted its business model to directly address the vast, underserved market of Obstructive Sleep Apnea. By shifting from a challenging dentist-centric approach to a direct-to-patient model through medical sleep center acquisitions and alliances, Vivos is leveraging its FDA-cleared, non-invasive Vivos Method to offer a highly differentiated and patient-preferred alternative to traditional OSA treatments. The early operational success and strong economic projections from the SCN acquisition, coupled with management's ambitious target of achieving cash flow positive operations by Q4 2025, underscore a compelling investment thesis.

While significant execution risks related to integration, regulatory compliance, and liquidity remain, Vivos's management, drawing on a proven track record of scaling professional practices, is methodically building a foundation for sustainable growth. The company's technological leadership, validated by clinical efficacy and unique CPT codes, positions it to disrupt a market ripe for innovation. Investors should closely monitor the successful deployment and ramp-up of SO teams, the progress of the M&A pipeline, and the company's ability to secure favorable financing, as these will be critical indicators of Vivos's ability to unlock the full potential of its airway revolution.