Good afternoon, and welcome to the INVO Bioscience second quarter fiscal year 2023 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Robert Bloom of Lytham Partners. Please go ahead.
Great. Thanks so much, Kate. good afternoon, everyone, and thank you all for joining us for INVO Bioscience's second quarter, 2023 financial results conference call. Joining us on the call today are INVO Bioscience's CEO, Steve Shum, the company's Chief Operating and VP of Business Development, Mike Campbell, and Andreaa Gorin, the company's Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. Before we begin with the event, we submit for the record the following statement.
Certain matters discussed on this conference call by the management of INVO Bioscience may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and such forward-looking statements are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. All statements regarding the company's expected future financial position, results of operations, cash flows, financing plans, business strategies, products and services, competitive positions, growth opportunities, plans and objectives of management for future operations, as well as statements that include words such as: anticipate, if, believe, plan, estimate, expect, intend, may, could, should, will, and other similar expressions, are forward-looking statements.
All forward-looking statements involve risks, uncertainties, and contingencies, many of which are beyond the company's control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. Factors that may cause actual results to differ materially from those in the forward-looking statements include those set forth in the company's filings at www.sec.gov. Company's under no obligation to and expressly disclaims any such obligation to update or alter our forward-looking statements, whether as the result of new information, future events, or otherwise. With that said, let me turn the event over to Steve Shum, Chief Executive Officer of INVO Bioscience. Steve, please proceed.
Thank you, Robert, and welcome everyone. We are excited to be on the call today, just a few days after completing and announcing what we believe is one of the most important developments in the company's history, and one that we also believe targets the company for operating cash flow break even in 2024. The final closing of the acquisition of the Wisconsin Fertility Institute, announced on Friday, not only adds important operating scale to the business, but also further accelerates our transition from purely a medical device company to a healthcare services provider focused on the fertility market. To remind everyone why this transition is important, it provides us the ability to capture a greater portion of the revenue and profit opportunity associated with treatment in general, and with the treatment solution that INVOcell provides.
To put that in context, an INVOcell device sold on its own creates revenue of approximately $400 per unit. A complete IVC procedure can generate about $4,500-$7,000 per cycle of revenue, with operating profits at scale well in excess of the device profit. This ability to capture greater revenue and profitability scale, while also expanding the use of INVOcell and the IVC procedure, is why we remain excited by the progress being made and is the key driver behind the transition. As background, this transition started in the latter part of 2021 with the opening of our first INVO Center in Birmingham, Alabama.
We quickly then added centers in Atlanta, Georgia, and Monterrey, Mexico, which, combined with Birmingham, recorded revenues of $712,000 during the second quarter, an increase of 145% compared to the year ago period, which equates to an annualized rate of approximately $3 million. Importantly, these centers are operating close to a break-even point currently, a significant accomplishment just more than a year since operations. With incremental growth expected at these clinics in the future and high contribution margins inherent in this model, we expect strong profitability in the years to come.
The INVO Center growth potential and profitability model is why we look forward to expanding those efforts, which brings us back to the acquisition of Wisconsin Fertility, which is not only highly profitable, but we believe there are added growth opportunities available as we look to integrate the INVOcell solution within those existing operations. As we have reported, Wisconsin Fertility Institute had revenue of more than $5 million at their single location last year, with net income of approximately $1.7 million. These are important metrics for a couple of reasons. First, it immediately doubles the existing run rate of our clinic operations. Second, the profitability of the clinic substantially improves our overall operating performance. Finally, it highlights the revenue and net income potential that we believe is available with each of our existing INVO Centers.
Over $5 million and $1.5 million in net profit per center is a goal we are looking to achieve in all of our centers when they reach scale. As we look to the future, our center expansion strategy will be twofold: company-built centers, with our next one set to open in Tampa soon, and acquisitions where we can synergistically introduce INVOcell into existing IVF clinics that we take ownership of. Why was Wisconsin Fertility Institute such a logical choice for our first acquisition beyond the attractive financial profile?
First, the clinic has an excellent reputation, not only in the local community, but nationally, as one of the top fertility centers in America, having helped to welcome over 5,000 babies since opening its doors in 2007, and with approximately 550 conventional IVF procedures completed in 2022. It is led by an internationally renowned and well-respected fertility expert, Dr. Elizabeth Pritts, who shares in our vision and opportunity to democratize fertility. We look forward to having the Wisconsin clinic and staff now a part of our operations. With a fantastic team in place, a long-established track record in the local market, a shared vision, and of course, the highly profitable nature of the operations, there is excitement all around on the completion of this transformative acquisition.
Taking a step back to our existing operations, as I mentioned at the onset, our existing clinics continue to make solid progress. Revenue from all clinics during the quarter improved nicely compared to last year. It is our belief that this ongoing progress validates the company build INVO Center model and concept. Further, we have also gained significant experience and insight from these initial centers, which we believe we can apply to future centers to more quickly ramp them. On the topic of expansion, we are moving closer to opening the new INVO Center in Tampa, which we expect to be ready in the next 60-90 days. We are excited about Tampa, which we believe is a large and attractive market. We have assembled an excellent team to operate the practice, with that team well into training and planning phases in preparation for the opening.
We will keep you updated on the planned opening in the coming months. We are carefully evaluating timing on future INVO Centers, especially given our balanced efforts now between company-built and acquired practices. We believe there are a number of existing opportunities for both going forward. In addition to our clinics, we continue to support, service, and expand INVOcell across existing IVF clinics. To that end, product revenue increased 82% during the second quarter. A key component that we believe will further drive adoption is the FDA's 510(k) clearance we received to expand the labeling on the INVOcell device and its indication for use to provide for a five-day incubation period. This occurred in June of 2023. The results demonstrate and validate the improved patient outcomes with longer incubation time, which we believe will help build further credibility in the market around the solution.
I cannot say enough what a significant accomplish this was and the importance and value this will bring in our efforts to increase adoption. Importantly, with that effort now successfully completed, we have now been able to eliminate the prior costs associated with this effort on a go-forward basis. On that note, in connection with our transition to a healthcare services company, we have implemented further corporate expense reductions, which when combined with the profitable acquisition, the ongoing improvements in our existing INVO Centers and the 510(k) cost reductions, significantly improves our operating picture and will lead us to a shorter timeframe to reach an overall Adjusted EBITDA profit, which again, we are targeting in 2024. With that, let me turn this over to Andrea to quickly cover added financial details. Andrea?
Thank you, Steve. Thank you, Steve. Revenue for the quarter totaled approximately $316,000, compared to approximately $146,000 in the prior year period. Approximately 81% of Q2 revenue, or $254,000, consisted of consolidated service revenue from our INVO Center Atlanta, in comparison to $112,000 in the prior year period. The remaining 19% represents product revenue from INVOcell sales to IVF clinics. As a reminder, our operating INVO Centers in Birmingham and Monterrey are accounted for using the equity method. Revenue from all three clinics totaled $712,000 in the quarter, compared to $291,000 in the prior year period. The increase in revenue reflects the cumulative impact of marketing efforts to build awareness for the clinics, their respective services, and INVOcell and IVC in general.
We expect 2023 clinic revenue to continue to build throughout the year, primarily from the inclusion of the Wisconsin clinic results and to a lesser degree, from the launch of our Tampa INVO Center. Both clinics are wholly owned and will be consolidated into our financial statements. To reflect our transition from medical device company to a fertility service provider, from this quarter onwards, cost of revenue is presented in the operating expense section of our income statement. Our operating expenses decreased to approximately $2.4 million, from approximately $2.8 million in the prior year period, largely as a result of lower personnel, marketing, non-cash stock-based compensation, and research and development costs. Operating expenses attributable to our INVO Center Atlanta were approximately $275,000.
compared to approximately $186,000 in the prior year period. On a combined basis, our three INVO Centers had approximately $799,000 in operating expenses, compared to approximately $680,000 in the prior year period. Our Adjusted EBITDA loss, which is net of non-cash charges mainly related to equity-based compensation, improved to approximately $1.6 million, compared to an Adjusted EBITDA loss of approximately $2.2 million last year. These amounts included a gain of approximately $4,000 and a loss of approximately $118,000, respectively, attributable to our INVO Center joint ventures accounted for with the equity method. With the inclusion of Wisconsin, along with the recent expense reductions Steve mentioned, we expect to achieve further improvements in our EBITDA performance moving forward.
On June 30, 2023, we had approximately $112,000 in cash and $1.3 million in debt. We have since repaid approximately $140,000 of convertible debt. In the quarter, we raised approximately $4.5 million in gross proceeds in a public offering of common stock and warrants. In advance of the offering, we implemented a one-for-20 reverse split, which allowed us to regain compliance under NASDAQ's minimum bid price requirement. As of today, we have approximately 2.4 million shares of common stock and approximately 3.5 million warrants outstanding. Back to you, Steve.
Thank you, Andreaa. Before we open for your questions, let me summarize. As highlighted, we believe the recent events and progress has substantially improved the company's operations on a go-forward basis. We finalized and closed a major acquisition, adding meaningful revenue and operating profits. Our existing centers are becoming self-sustaining, and we expect further growth. We concluded our FDA clinical efforts with a very successful outcome that further validates the success of INVOcell, and we can now eliminate those costs moving forward. We are close to the opening of the new INVO Center in Tampa, which will provide an added growth, and we will seek out additional acquisitions to further help accelerate building added scale in our operations. We believe we have now transitioned beyond just a medical device technology company and selling the INVOcell device.
We have now become an integrated clinic company focused on offering treatment solutions to patients within the large and growing fertility market. We expect our enhanced commercial approach will also naturally increase the utilization and grow INVOcell and the IVC treatment process within the market. We believe our efforts, along with our technology, put us in a unique position, and we have set the foundation from which we believe we can drive shareholder value. With that, we'll open up for questions. Operator?
We will now be... Thank you. We will now begin the question-and-answer session. To ask a question, you may press Star one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press Star two. The first question is from Michael Ochulnitch of Maxim. Please go ahead.
Hey, guys. Congratulations on the progress this quarter, and thanks for taking my questions today.
Thank you, Michael.
I'd like to see if you could expand a little bit more on the importance of gaining that 510(k) clearance for the five-day incubation period. Obviously, this is, you know, a really important development, but could you talk a bit about how this changes your competitive messaging when you're talking to prospective patients and they're evaluating INVOcell versus traditional IVF?
Yeah, sure. Great. Well, as a reminder, everyone, our original clearance for the device was for a three-day incubation period, which, similar to IVF, has lower outcomes, patient outcome success rates. As we've been in the marketplace, you know, we have to message marketing-wise and so forth, to both physicians as well as patients, what our label approval was for and the results, and the, the results of that. What we often found in the market was that it was really the, the comparison that was often occurring was comparing conventional IVF treatment, which was often being done at 5-day, compared to our 3-day you know, label approval.
Even though many of our early adopters of the technology were using our device off-label and incubating for five days, which is why we had a volume of data that we could use to real-world data that we could use to support a 510(k) submission for a label enhancement. The advantage of having gotten through that multi-year process is that now we can, you know, better reflect our technology that we've long known has a better outcome rate, similar to IVF, when you can incubate for a longer period of time. In our minds, it really helps equalize the playing field in the marketplace. I, I would say it's, in our minds, it's very significant. It's why we went through that multi-year effort to achieve that improved labeling for the device.
Now we can speak more openly and actively to both patients as well as physicians, and reflect validated data to them that demonstrates, you know, the higher quality outcomes for patients, based on a five-day incubation period. Again, it's very significant for our marketing efforts. We think it's very significant for potentially partnering with physicians, to team up with us, whether we're doing, you know, building new INVO Centers or potentially acquisitions. It has significance- you know, in many aspects of the business for us.
All right. Yeah. Actually, I do want to follow up a little bit on that last point you were making and just see if you could talk about how the five-day incubation approval, how you expect that to benefit the clinics, or is this more about attracting new practitioners, new clinics, or do you see this as something that'll actually benefit your existing clinics and their growth rates?
Oh, I think it's hugely beneficial to even our existing clinics. Again, they, they can now. Even, even clinics themselves have to be careful about how they're marketing a technology in terms of its, you know, official labeled usage. So now our own, you know, our own centers and our physicians within those centers can do more proactive marketing to patients, and we think that could be very instrumental in helping to attract, you know, further build awareness in the, you know, around the technology and bring a higher volume of patients into the clinic. Because obviously, for patients, a successful outcome is one of the most important drivers in their minds.
Of course, their ability to afford the treatment is important too, but they want to, you know, as we always, you know, say internally, the most important thing is having a successful outcome and having a baby. Being able to, again, do, do bigger picture marketing that, you know, can demonstrate those results more proactively, we think could be a very significant driver, again, in bringing more traffic and more patient volume into the clinics.
You don't want them to-
By the way, yeah, I'd like to let Mike Campbell even add to that. He's probably got some thoughts on that too. Go ahead, Mike.
Yeah. Just, just briefly, Michael, I mean, we are at a significant disadvantage competitively because our competitors, who are the IVF clinics, are telling their patients that the INVOcell technology is only 29% successful, and their outcomes with conventional IVF are 50% plus. Again, you know, per the FDA, those were our, 29% was the day three data that was approved for the label. There's a misconception in the market that our technology is significantly inferior, when in fact, it isn't. Now we are finally able to put the real data out there in front of the community. Again, this is a patient-driven market, and it's very important that patients understand that this technology delivers the same outcome for less money.
Yeah, no, certainly a key point here. And then just, I guess, looking to your break-even 2020, could you expand on what sort of assumptions go into that? Does this factor any additional clinics? What level of growth at existing clinics are factored in there? And what kind of cost savings do you look at when you're making that evaluation?
Sure. Great question. What our key assumptions are is that we will get some incremental growth out of Wisconsin off of its current baseline as we integrate INVOcell. We're not, we're not trying to be too aggressive there, just, you know, looking to bring the technology in and add some patient volume into that practice as we go into next year. Obviously, bringing Tampa up, up, and running, here this year, we anticipate to be a factor in benefiting that goal for next year. Of course, our existing centers staying on the same trajectory. That's really the, the, the key components. We're not, we're not even factoring in additional acquisitions.
We do think there are potential additional acquisitions, which would only help us accelerate and get there faster in our minds, but it's not part of how we see the plan to do it with just what I just laid out from a revenue standpoint and growth standpoint. On the cost reduction side, we've already implemented those. Again, that really was happening in the beginning of the current quarter that we're in, as we concluded the 510(k) costs, and then we made some other corporate adjustments. We've taken some costs out of the business to be a little more focused.
Now, of course, we're going to be adding in the Wisconsin operation, so from an absolute standpoint, there will be, you know, more substance to the business and their, their sort of costs, but remember, they're profitable. We're, when we look at it, we're, we've taken out costs from sort of the corporate side, and those, you know, those were pretty meaningful between the 510(k) costs and some of the other corporate costs we've reduced. Those are. We probably, I would, I would say I'd ballpark that about 30% of the corporate costs have been reduced on, and we expect to maintain, you know, those levels as we go into next year.
All right. Very much.
Thank you.
Again, if you have a question, please press Star, then One. This concludes our question and answer session. I would like to turn the conference back over to management for closing remarks.
Well, great. Thank you, everyone, that, joined the call today. We, we appreciate your time. As always, please do not hesitate to reach out if you have any follow-up questions. Thank you again.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.