DarioHealth Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 14, 2025

There are 6 speakers on the call.

Operator

morning, ladies and gentlemen, and welcome to the DarioHealth First Quarter twenty twenty five Results Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Wednesday, 05/14/2025. I would now like to turn the conference over to Kat Paralla, Investor Relations Manager at Dario.

Operator

Kat, please go ahead.

Speaker 1

Thank you, operator, and good morning, everyone. Thank you for joining us today for a discussion of DarioHealth's first quarter twenty twenty five financial results. Leading the call today will be Erez Raphael, Chief Executive Officer of DarioHealth. He'll be joined by Laura Dodo, our acting Chief Operating Officer. Laura's remarks have been prepared by our Chief Commercial Officer, Steven Nelson, who is unable to attend today due to an injury requiring medical attention.

Speaker 1

Fortunately, he's expected to recover quickly, and we're grateful to Laura for joining us today on his behalf. An audio recording and webcast replay for today's call will also be available online as detailed in the press release invite for this call. For the benefit of those who may be listening to the replay or archived webcast, this call is being held on Wednesday, 05/14/2025. This morning we issued a press release announcing our financial results for the first quarter of twenty twenty five. A copy of the release can be found on the Investor Relations page of DarioHealth's website.

Speaker 1

Actual events or results may differ materially from those projected as a result of changing market trends, reduced demand, or the competitive nature of DarioHealth's industry. Such forward looking statements and their implications may involve known and unknown risks, uncertainties, and other factors that may cause actual results or performance to differ materially from those projected. The forward looking statements discussed on this call are subject to other risks and uncertainties, including those discussed in the Risk Factors section and elsewhere in the company's first quarter twenty twenty five quarterly report on Form 10 ks. Additional information concerning factors that could cause results to differ materially from our forward looking statements are described in greater detail in the company's press release issued this morning and in the company's other filings with the SEC. In addition, certain non GAAP financial measures may be discussed during this call.

Speaker 1

These non GAAP measures are used by management to make strategic decisions, forecast future results, and evaluate the company's current performance. Management believes the presentation of these non GAAP financial measures is useful for investors' understanding assessment of the company's ongoing core operations and prospects for the future. A reconciliation of these non GAAP measures to the most comparable GAAP measures is included in this morning's press release. With that, I'll hand it over to Erez Raphael, CEO of Dartio Health.

Speaker 2

Good morning, everyone, and thanks for joining our call today. Over the past few years DarioHealth has undergone a transformational shift, evolving into a leading healthcare technology company operating under a SaaS like model. This evolution has solidified Dario's position as a premier platform in the B2B2C market, expanding sales to employers, health plans, and strategic partners while continuously enhancing our technology, product offering and AI powered capabilities. In the first quarter of twenty twenty five, we signed 14 new clients. We achieved 17.5% non GAAP gross margins and maintained over 81% gross margins in our core B2B2C business.

Speaker 2

Our operating expenses declined 35% year over year, demonstrating our continued progress toward the linear, more scalable model. The acquisition and the seamless integration of Twilio, value most significant to date, has strengthened our leadership in the industry, creating one of the most comprehensive clinically integrated digital health platforms. Now supporting five chronic conditions under a single unified brand, we are uniquely positioned to meet the growing demand for consumer centric, all person care in an increasingly value driven healthcare environment. We are focused on execution, turning this vision into measurable results. In Q1, we continue to build momentum across client acquisition, operational efficiency, platform integration and strategic realignment.

Speaker 2

I would like to elaborate on the broader market context, whole person, multi condition leadership. The market continues to shift decisively toward whole person digital health and platform consolidation. Employers and health plans are moving away from siloed point solutions and looking for trusted partners that can deliver multi condition care at scale with proven outcomes, seamless integrations, and measurable ROI. Dalio is positioned ahead of this shift. With the integration of Twill, we now offer one of the most comprehensive and clinically integrated product portfolios in the industry, enabling unified platform that supports metabolic, behavioral, and master skeletal health.

Speaker 2

Our AI powered platform now manages five different chronic conditions under a single brand, making Dario a true leader in the multi condition whole person care. The brief is more than just clinical. It's commercial. It allows us to engage multiple populations, expand within accounts, and deliver value across diverse benefit structures and risk sharing models. And we are not doing it alone.

Speaker 2

Our strategic partnership with leading virtual providers like RULA in behavioral health and Mediobis in GLP-one prescribing and chronic care allows us to deliver deeper, more personalized care while enabling scalability and cost effectiveness. This is not theoretical. It's embedded into our client board, our platform strategy, and our day to day execution. I would like to provide some strategic and operational updates. We delivered $6,750,000 in revenue this quarter, a 17% increase year over year driven by recurring revenue growth from our B2B2C channels.

Speaker 2

Sequential revenue was lower compared to Q4, primarily due to the shift in scope with large national health plan clients. What began as an initial implementation for a narrow population segment was in sourced. We are now in a broader evaluation process, including an active RFP covering Dario's full platform. Additionally, we experienced timeline extension in other projects due to tariff related pressure, which impacts both hardware sourcing and partner side execution. Despite these external factors, we continue to execute against focused strategy centered and platform differentiation, client quality, and commercial scalability.

Speaker 2

On the commercial side, we are seeing a meaningful traction across our commercial business. 14 new clients signed year to date, one national health plan, one regional health plan, 12 employers. Total client base now 97, up from 83 at the end of twenty twenty four. '80 percent plus of the new contracts are multi condition. Average accounting agreement is three years with a renewal rate remains above 90%.

Speaker 2

Pipeline retirement underway, prioritizing high quality long term deals and phasing out lower value transactional opportunities. Gross margin on a non GAAP base expanded to 70.5%, up from 62.4% in the first quarter of twenty twenty four. The core B2B2C business is sustainable at above 81% gross margins on a non GAAP basis for the last four quarters in a row. Non GAAP operating loss improved from $9,100,000 to $5,800,000 year over year, representing 36% reduction. We continue to focus on narrowing the gap toward profitability.

Speaker 2

The commercial strategy supports a more predictable recurring revenue model and aligns with our long term growth objectives. AI transformation. AI continues to be a major driver in Dowser's competitive advantage. Our approach, what we call AI cubed or AI in third power, leverages artificial intelligence in three key ways. One, operational efficiency, AI powered automation, engagement, and workflow, and significantly reduces cost to serve.

Speaker 2

Two, member engagement. AI driven hyper personalized delivers precise, proactive, and data informed interventions that improve users' outcomes, satisfaction, and retention. Three, customer value. AI based analytics provide employers, health plans, and pharma clients with predictive insights and our visibility enabling smarter, cost effective healthcare decisions. With twenty five years of user data, 5,000,000 patient records, and billions of engagement data points, WAI CUBE's strategy is driving the measurable shift in how we operate and deliver value.

Speaker 2

This quarter we continued enabling AI into care navigation, behavioral outreach, internal operations, and reporting, reducing manual overheads and accelerating return to value for our clients. We expect these efficiencies to contribute to a further 15% to 20% reduction in operating expenses over the next twelve to eighteen months, supporting scalable and profitable model. On the leadership side, the company executive leadership team significantly strengthened over the past year, continues to focus on improving execution, forecasting, and cross functional alignment. Since June 2024, Dario has added a new Chief Commercial Officer, a Chief Operating Officer, a Human Resource Officer, and most recently a new Chief Financial Officer forming a unified and execution focused team. This leadership group brings deep experience across healthcare technology and operations and has already begun executing key transformation priorities across commercial strategy, cost structure, and platform evolution.

Speaker 2

With these things now in place, Dialog is well positioned to deliver on its strategic priorities, drive operating leverage and support the company's next phase of growth. On the capital and cash flow, in Q1, we completed an equity raise and refinanced our debt. With a new structure, debt amortization is deferred from the end of twenty twenty five to 2028, creating a financial flexibility and supporting our multi year goal of achieving cash flow positive from operations. We remain on track to achieve operational cash flow breakeven run rate by the end of twenty twenty five, supported by existing account extension, new contract swings and deep pipeline of near term opportunities. In summary, we are scanning intentionally operating with discipline and deepening our platform values across partners.

Speaker 2

We have the right team, the right strategy and the right momentum. With that, I'll turn over the call to Laura.

Speaker 3

Thank you, Erez, and good morning, everyone. Over the past twelve months, we've accelerated client growth, deepened our strategic partnerships, refined our go to market execution and expanded our platform capabilities. Q1 twenty twenty five marks another step forward in our evolution into a fully integrated AI powered digital health platform, purpose built to drive long term value for our clients and sustainable growth for Dario. We signed 14 clients year to date including a national health plan, a regional plan and 12 employer partners. More than 80% of those contracts are multi condition and our clients renewal rate remains strong above 90% reinforcing satisfaction and long term platform value.

Speaker 3

That's not just a reflection of product performance. It's an indicator of our ongoing capability and strategic value. The employer model continues to consolidate around solutions that deliver measurable ROI, cost containment and better outcomes. Employees are telling us that they no longer want disconnected point solutions. Instead, they're looking for unified clinically integrated platforms that address multiple conditions through a consistent consumer centric experience.

Speaker 3

ZORIO's GLP-one companion solution remains a key entry point uniquely supporting the full treatment journey from onboarding to behavioral reinforcement destructured off boarding. It's more than content. It's an AI informed experience integrated with prescribing behavioral health and outcomes monitoring. We stand apart in this space While other offers behavioral overlays, Dario offers a prescriber backed remote monitoring enabled experience through our midi August partnership, making our GLP-one solution clinically complete and highly effective to self insured employers. Our new product packaging and outcomes based pricing models are resonating.

Speaker 3

We've simplified adoption through claims based billing and smarter employee targeting using AI driven stratification. This lowers the barrier to entry and aligns our incentives with client success. Our recent integration with RULER further strengthens our behavioral health capabilities, offering employers access to one of the largest therapy networks in The US. This combination allows us to provide a full continuum of behavioral support at a time when mental health remains a top priority for HR and benefit leaders. Looking ahead to the back half of twenty twenty five, we expect expanded uptake of our GLP-one and cardio metabolic bundles among mid sized employers.

Speaker 3

Our modular packaging combined with our ability to bundle physical and mental health services is giving us an edge in the competitive RFP environment. We are actively tracking over three dozen employer opportunities for 2026 with expectations that some of these will be won and launched within 2025. Worth noting, of the 12 signed thus far for the year, five of those will begin in the second half of twenty twenty five. On the payer side, demand continues to rise for scalable, flexible and proven multi condition platforms. Health plans are under pressure to reduce costs, improve outcomes and best engage their members, especially across Medicare Advantage and Medicaid.

Speaker 3

Our platform is purposeful to support this transition. We're delivering value in two key ways. First,

Speaker 2

through

Speaker 3

condition specific bundles that embed into existing health plan care models. And secondly, through platform as a service arrangements that allow for deeper integration into payer infrastructure. We are actively engaged with multiple national and regional payers in high value long term discussions. Two top tier health plans are currently evaluating our full suite platform for deployment in 2026. This is a strong validation of the direction we're taking.

Speaker 3

And several others have initiated multi condition pilots that we expect to mature into expanded relationships. With RULER as our behavioral health partner, we now offer in network clinical integration for mental health, completing and complementing our AI powered digital interventions. This is particularly meaningful for Medicaid and Medicare Advantage populations where access gaps remain prominent. Our new payer wins expected to go live in Q3 and Q4 will begin contributing revenue in late twenty twenty five and scale into 2026. Our pipeline also includes three platform wide proposals with large plans under NDA, targeting a 2026 implementation horizon.

Speaker 3

If one of these are converted, it will represent a 7 figure annual recurring revenue opportunity and will position Dario as a core infrastructure partner for multiple years. The pharma channel continues to evolve into a high margin recurring revenue stream for us. We are seeing increased interest in Dario's platform as a service model, which integrates prescribing, digital interventions and real world evidence. Our collaboration with Sanofi is now fully commercial and expanding. Pharma companies are embedding Dario into their patient support strategies recognizing our ability to increase adherence, improve outcomes and provide data rich engagement insights.

Speaker 3

Five of the top 25 pharma and medical device manufacturers are in pilot or contracting phases with Dario today. With Mediobus we can now offer prescribing and remote monitoring enabling pharma to build integrated, scalable care models around their therapeutics. This has become a differentiator in a crowded digital health landscape. We're no longer just enabling engagement. We're enabling care pathways.

Speaker 3

The twenty twenty six pharma pipeline is maturing. We currently have two advanced stage platform opportunities, including multiple large market chronic indications where Dario is positioned to be the digital backbone of next generation therapy support programming. These programs not only represent revenue expansion, they also serve as validation of our strategic positioning. As we observe competitors moving towards public markets, it's important to reflect on how Dario stands out. Some of these competitors are scaling fast but with generic solutions.

Speaker 3

Dario is scaling smart, deepening high value relationships by enabling clinical continuity across multi conditions and delivering on sustainable financial and health outcomes. Unlike companies that offer GLP-one support in a silo, Daria provides a prescriptive end to end model. Our outcomes based pricing ensures clients are only paying when we deliver value. And with claims based integrations, we are easier to implement at scale. Finally, our platform isn't just clinically sound, it's evidence backed.

Speaker 3

With a growing base of peer reviewed publications, third party validation and regulatory aligned design, Dorea is raising the bar for clinical credibility in digital health. We believe that credibility will be the difference maker as more payers and employers scrutinize long term outcomes and return on investment. We're also investing in scalability. We've strengthened our operating model, restructured our go to market teams, and deployed AI throughout internal and client facing workflows. These changes are already improving forecast visibility and accelerating time to value.

Speaker 3

Our commercial pipeline is the strongest and most qualified it's ever been. We're prioritizing recurring high quality revenue and deemphasizing lower value transactional deals. As a result, we're building a more durable predictable business. Looking ahead further, 2026 is shaping up to be a breakout year. We have a robust pipeline of employer expansions, health plan launches, and pharma programs that will begin implementation in late twenty twenty five and scale throughout 2026.

Speaker 3

Our ability to capture, convert, and grow these opportunities is directly tied to the infrastructure investments and commercial strategy we've put in place during 2025. We're not chasing volume. We're building the infrastructure of tomorrow's digital care delivery today, one that works for employers, plans and life science companies and above all for the people they are designed to serve. In short, we are focused, differentiated and executing against a clear strategy. As we scale deeper into 2025 and gear up for 2026, we're confident in our ability to drive sustained commercial growth, deliver measurable impact and lead the industry forward.

Speaker 3

With that, I'll turn it back to Erez.

Speaker 2

Thank you, Lara. As we close today's call, it's clear that 2025 is off to a focused and disciplined start for value health. We are executing on our strategy, scaling our B2B2C business, expanding platform adoption across employers, health plans and pharma, and driving measurable operational improvements. We have built one of the most comprehensive AI powered platforms in digital health supporting chronic conditions across metabolic, behavioral and musculoskeletal care. Our core business has now sustained non GAAP gross margins above 81% for four consecutive quarters, while operating expenses declined 35% year over year.

Speaker 2

We remain on our track to achieve operational cash flow breakeven run rate by the end of the year. At the same time, we are seeing early signs of broader reset in digital health market, one of the federal sustainable outcomes driven business models. With OMADA S1 filed and under like Hinge and Sword reportedly preparing to go public, investor interest in returning to companies that can demonstrate scale retention and real world impact. The new wave gives us reason for optimism. We believe this next chapter will elevate the value of companies that combine clinical credibility, platform depth and financial discipline.

Speaker 2

And we are confident that Dara is one of them. We have scaled with precision, not burn. We have built for integration, not fragmentation and we are delivering both operational performance and long term strategic value. Looking ahead, our priorities are clear. First, accelerating strategic commercial growth, deepen presence across employers, health plans, benefit administrators, and life science with high value recurring partnerships.

Speaker 2

Second, lead the market shift to whole person AI powered care. Deliver scalable, personalized care across five chronic conditions with measurable impact. Third, drive toward profitability with precision, continue to expand margins, optimize cost structure, and deliver long term operating leverage. This isn't just a rebound for digital health, it's a reset, a return to fundamentals and value is built for this moment. On behalf of our leadership team, I want to thank our employees, clients and investors for your continued trust and partnership.

Speaker 2

We are energized by the momentum we have built and we look forward to sharing our continued progress throughout 2025. With that, I want to hand over the call to the operator for Q and A session.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you a question, please press the star button followed by the number one on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to cancel your request, please press the star button followed by the number two.

Operator

And if you are using a speakerphone, please leave the handset before pressing any keys. Your first question comes from Charles Yi from TD Securities. Please go ahead.

Speaker 4

Yeah. Thanks for taking the questions. Hey, Erez, at the beginning, you kind of made mention, right? Some of the timelines were there's some timeline delays related. I think you said related to tariffs.

Speaker 4

Can you explain that a little bit more what's happening there?

Speaker 2

Yes, absolutely. Or maybe I'm just So, yeah, we mentioned it in the script and also in

Speaker 5

the press

Speaker 2

release. There is one large account that we had last year that is transforming, and it's transforming from a certain offering that we had on the mental health side into something that hopefully is gonna be larger for the full suite, and we are now in the process of changing it. So this is something that created a decline of revenue that was in the previous quarter but didn't show up in this quarter, so this is one thing. The other thing, it's not like something big on the tariff, but there are some couple of delays with a couple of accounts that were somehow related to tariff issues. It's not employers or health plans, it's like mainly specific partnerships that we had, and this is also something that created some unexpected changes in the revenues of this quarter.

Speaker 2

The expectations was that we would grow up to sequentially, but it didn't happen due to these two reasons that we believe that is going to be recovering in the next few quarters moving forward.

Speaker 4

Then maybe sticking with that, if we think about on the partnership side, obviously, both Twilio and Dario had partnerships with pharma. Pharma companies are facing potential tariffs coming possibly soon. Are you having any discussions with it there as they look to deal with those and obviously some other things that are going on in terms of Trump's efforts and maybe drug price controls, etcetera. Has that changed any of the discussions, maybe caused them to kind of pause activities as a result as they try to tackle some other issues?

Speaker 2

Partially, yes. But just to remind you, the majority of the revenue that we have on the B2B side is coming from employers and health plans. So, yes, there is some discussions there and there are some slowdowns there that's related to that. But from the first place, the pharma channel is contributing this year somewhere between 5% to 10% of the revenues, so it's not going to be meaningful even if pharma is going to go slower than what we anticipated. The other issue that I mentioned, at the beginning of my answer was, was a large client that is actually a health plan that was on the mental side and is, like, transforming the account.

Speaker 2

It's like a account that was running for three years. And in the renewal, we got into discussion about how it's gonna be renewed, then we got into another three courses that hopefully is gonna end up with renewing on the full suite. So this is, the the main reason why sequentially it didn't go up like it was supposed to go. Because the the Got it. The business the new business that the the new business that that got in is a new business that came into this quarter and started to grow, and we believe that the new business is going to continue to grow in Q2.

Speaker 2

So the new business came, the retention of the users and so on is still very strong. Also, the retention of the accounts, one of the things that we disclosed in the press release and in the script, that the renewal rate is 90%. So, it's a single account that relatively was big that came together with the Twilio acquisition that a start of posters for renewal is getting into something larger under RFP and it created kind of a hole into this quarter.

Speaker 4

Got it. Understand that. Okay, that's helpful. And maybe can you I know you guys talked last quarter about the partnership now with Rula Health. Can you talk about how that's rolling out and what percentage of your clients now have access to that?

Speaker 4

And maybe any update there would be helpful.

Speaker 3

Hi, it's Laura speaking. Thanks for the question. Over q one, we started to introduce that relationship in a systematic way beginning with our existing book of business. We've already seen the adoption by right now, I think we live with about three or four in a in a road map of others to go onto it for the initial integration with Real Estate. That works underway and being well accepted.

Speaker 3

And then we are looking at border based campaigns on to also leverage that relationship in our direct to consumer as well. So more to follow. We Eric spoke about some of the national plans where we're looking for deeper integration. Six year rule of integration will be part of that conversation as well. So I want to follow in the next queue.

Speaker 4

Great. And maybe one last question for me. If we think about sort of the path to cash flow breakeven by year end, can you just give us a sense then in terms of how we should think of which lever should we really be thinking that's going to be coming from? Would you say it's revenue driven or should we see expenses from current levels come down further? Just maybe help us bridge a little bit on getting there.

Speaker 4

Thank you.

Speaker 2

Yes, absolutely. It's a combination of the two, Charles. As we stated also in the press release, we took down the OpEx down drastically between Q1 twenty twenty four when we acquired Twilio into today. Non GAAP, I think it was like 10.7. Then it keeps going down to some of it in the ranges of like $9,000,000 by the end of the year.

Speaker 2

That alone will not take us to peso positive. In order to get to peso positive, we need to generate between $4,045,000,000 dollars yearly run rate. So, it's more about getting the growth than keep working on the OpEx in order to get this finish line. We are very excited about the gross margins of the B2B2C business, because for four quarters in a row it's about 81%, and if we're going keep getting more revenues coming from employers and health plans, the total merge of B2B2C versus B2C is going to be larger and the gross margins are going to be higher, and that's also something that will contribute to this projection that eventually we want to get to operational cash flow run rate by the end of the year. So, that's it's more like revenue, it's also gross margins, and it's also OpEx.

Speaker 2

It's a combination of the three.

Speaker 4

And I'm sorry, just to clarify, when you say operational cash flow by year end, are we talking like what we the run rate as we're exiting December versus what the actual revenue and just EBITDA might be for the fourth quarter itself?

Speaker 2

It's more like December to January. That's the most accurate estimation that we can give. Yes. This is why we are saying given. This is how we see it.

Speaker 4

Perfect. Thanks.

Speaker 2

Thank you, Chuck.

Operator

Thank you for the question, Charles. And, again, if you have a question, please press the star button followed by the number one on your telephone keypad. And if you wish to cancel your request, please press the star button followed by the number two. Again, if you have a question, please press the star button followed by the number one. And for our second question, we have here is David Grossman from Stifel.

Operator

Please go ahead.

Speaker 5

Good morning. Thank you. Maybe, Erez, I I think in your prepared remarks, you talked about the activity with large pharma. And I know there's been some transitions as a result of the TWIL acquisition. So perhaps you could give us an update or a little more detailed update on what's going on with large pharma.

Speaker 5

I know you said it's only going be 5% to 10% of this year's revenue, but perhaps you could talk about what's in the pipeline, the types of deals and the scale of those deals.

Speaker 2

Yes, absolutely. So let's start with the one that we had in the past, which is Sanofi. Sanofi was on a certain strategic deal and we moved into a commercial deal. This one was up and running from November into this year, and we started to see revenue again after it was like zero for a while. We started to see again revenue in Q1.

Speaker 2

So, this is one relationship. We had another two wins with, I would say, top pharma global companies. Big names, but at the moment we cannot disclose the names, but very large companies that were signing up on what we are calling the DarioConnect, which is a former known as TwillCare. And this one is these two will start contribute revenue from Q2 or Q3 and forward. The accounts are signed and the launch and how exactly it's going to contribute to the revenue, this is something that is not clear yet.

Speaker 2

We have some framework that we know what we are supposed to do and what is the potential revenue, but the launch didn't happen yet. One of them is in the ranges of like a half million to a million and another one over the next two to three years should get to millions of dollars because it's a full platform including GLP-one and other elements. So, would say that if I'm looking into the pharma kind of channel, the revenue if we're looking into this year, the majority of the revenue is going to come from three accounts. The three of them are very large companies. One of them is Sanofi and the other two is in the size of Sanofi as well.

Speaker 2

Once it's gonna be launched, probably we'll be able to disclose the names, but at the moment, it's not doable. So, if I'm looking into the entire revenue, think that like 10% is a very reasonable estimation for how much it's going to contribute to the revenue of this year.

Speaker 5

Okay. And just to be clear, are the vast majority of the deals just extending the TWIL platform under the new terms and conditions that you had outlined previously? Or is the character of the new relationships, you mentioned GLP-one, so I assume that that's front and center for a lot of these companies, but anything else to add in terms of what these contracts might look like versus what they've looked like historically?

Speaker 2

Yes, so historically the deal that we had with Sanofi was for cardiometabolic. And when we are looking into the deals that we have now, so there are two ways to contact with the pharma companies with the product that we have now. One of them is that we are selling the Dialog Connect, and Dialog Connect is allowing us to help pharma companies build communities on top of funnel and get users to the platform, so this is one. The second one is integrating into their care support for their users a mental health kind of management and support. So these are the two things that we are marketing to them.

Speaker 2

The way that we are contracting is that usually it's going to be, and this is why we made the changes in the business model, the way that we are contracting with them is that we are charging for a platform fee. So there is a level of setup fee, which is one time, and then there is a platform fee that should contribute on a recurring base to our revenue. So these are the two products. Both of them are kind of tool based products that are very consumer centric and are helping the pharma either manage the population on the mental side or help them get on different therapeutic areas, users to the platform and help them get closer to eventually to a prescription. That's the nature of the solutions.

Speaker 5

Got it. And, you know, I think you mentioned both in the press release and your prepared remarks about, you know, perhaps, you know, cleaning up some of the contracts that weren't really advantageous to longer term. Can you dimension the headwind that you're experiencing from that this year?

Speaker 2

Yes. So most of our contracts and more than 90% of them eventually are being renewed. And if we are looking into the book of business, the level of satisfaction is high. The headwind is mainly on the, you know, launching the product and growing them up in the velocity that we wanted it to grow. We also had kind of issues with the way that the book of business is distributed between certain accounts.

Speaker 2

So, a 90% renewal rate, if you have one account that is moving from Model A to Model B, that's something that creates a headwind. And if I'm looking into the retention of the account, the retention of the users, our ability to ramp up users and to execute, I don't see a headwind there. So that's on high level.

Speaker 5

Okay. So you're when you say transitioning, they're just transitioning to a different revenue model, and there's some disruption to revenue. You're not actually losing the client. Is that correct?

Speaker 2

Yes. In most of the cases, are not losing the clients and are moving to a different model and different offering. That specific account is the account that we inherited together with the Twilio acquisition and now we are in a very good discussion about embarking on the full platform, including what we have on the Metabolic side. It's a very large insurance company and that's it is one account that creates a difference in the revenues. If you look into the total business, the accounts that we signed last year, the launch of these accounts and the enrollment of these accounts, this is something that is working more or less according to the plan.

Speaker 5

Got it. Got it. And then in terms of the health plan that is kind of going from a behavioral, you know, a small sliver of their behavioral book to a full platform RFP, what do you think the timing of that award may be?

Speaker 2

Yes, we think that it's going to contribute to the revenues of once it's fixed, it's going to be probably Q3 revenues. Other than that, I just want to put things in perspective. We also disclosed, you know, without disclosing the names, we did disclose that we won another very large national health plan that is also going to launch on sevenone. So, this one that is going to be restructured and the one that we are launching in sevenone to the two large pharmas that I'm talking about, there is like four or five gigantic accounts that all of them are going to contribute to the revenues of this year. So, if we look into the big picture, we are confident that the company is going to move into the next level of revenue with the implementation of all of them.

Speaker 2

Specifically, the answer to your question about this account, it's probably going to be like a Q3 getting back to this revenue that we had lost and we're going to get it back in Q3.

Speaker 5

Just in the context of those comments, and I think to Charles' question, you talked about achieving breakeven. Was that the month of December or was that for the fourth quarter? I didn't quite get that.

Speaker 2

It's more like the month of December into January. It's a big part to predict accurately, but that's where we see it. Yeah.

Speaker 5

And then just again, back to these new clients that you just talked about, how much visibility do you have on achieving the revenue rate you need to achieve breakeven by the end of the year?

Speaker 2

From an account's perspective, and I mentioned these four accounts, the one that we are restructuring, the huge national health plan that we already know that we are launching on sevenone, and there is the Two Pharma, and there is another one which is a very large regional health plan that we also kind of in a very late stage of contracting. That's another large one that will probably also expand into a full insured business. If all those are going to launch, we're going to get there. If something is going to be delayed with the launch and so on, it's it's going to create a delay achieving this milestone, but we are confident that we're going to launch it. I mean, with all of them, we know exactly we have, like, things that are very well defined.

Speaker 2

So that's something that we have the business. It needs to be launched and we're going to get there. We're also trying to hedge by being very, very disciplined on our OpEx. So when we acquired Twill and we communicated with the market how our financial portfolio is gonna look like, we were talking about, again, took us a positive somewhere between 50 to 55,000,000, and we were talking about OpEx of 10 to 11,000,000. These guys were looking into an OpEx of run rate of 36,000,000 by Q4 of this year.

Speaker 2

We implemented a lot of AI capabilities. We are making our our operation much more efficient And, you know, looking on other digital health companies and what they are doing, we have a very, very healthy financial profile when it comes to gross margins, when it comes to OpEx, and when it comes to efficiency. So I think that we created some margin of safety by optimizing efficiencies and give the company more flexibility in the timeline of getting these revenues. So to make them so short, we are hedging the, you know, the risk of of of the revenue that is gonna come from these accounts by being very disciplined also on the OpEx. So, that's the story on how we are planning to get to operational threshold positive run rate by the end of the year.

Speaker 5

Right. Thank you for that. And just one last thing, Erez. With the recent financing, can you give us a sense of what the fully diluted share count would look like once you turn profitable?

Speaker 2

So we we did, like, a like an equity raise between December to January, and we also refinanced our debt, like, two weeks ago. So with these two activities, are very well funded, to get to this point. Because we funded the company with the preferred shares, and, if you go to Yahoo Finance, you're gonna see only the common shares, but including the preferred as converted, you're looking into 99,000,000. Actually, the company is gonna load today our corporate presentation, and in the corporate presentation, you can see a very accurate picture of our top table. But to make long story short, you're looking into 99,000,000.

Speaker 5

Okay. Great. That's it for me. Thanks very much.

Speaker 2

Thank you so much.

Operator

Thank you so much for the question, David. And since there are no further question at this time, this also concludes today's call. Thank you for participating. Everyone may now disconnect. Thank you so much.

Speaker 2

Thank you.

Powered by Quartr

Key Takeaways

  • DarioHealth posted $6.75 million in Q1 revenue, marking 17% year-over-year growth, with non-GAAP gross margins above 81% in its core B2B2C business and a 35% reduction in operating expenses.
  • The integration of the Twilio acquisition has created a unified, AI-powered platform supporting five chronic conditions, solidifying Dario’s position in the whole-person, multi-condition digital health market.
  • Signed 14 new clients year-to-date (bringing the total to 97), with over 80% of new contracts covering multiple conditions and a renewal rate above 90%, while shifting the pipeline toward high-quality, long-term agreements.
  • Dario’s “AI³” strategy—leveraging AI for operational efficiency, personalized member engagement, and predictive analytics—is expected to drive a further 15–20% reduction in operating expenses over the next 12–18 months.
  • A recent equity raise and debt refinance (with amortization deferred to 2028) have bolstered financial flexibility, keeping the company on track to reach operational cash-flow breakeven by the end of 2025.
AI Generated. May Contain Errors.
Earnings Conference Call
DarioHealth Q1 2025
00:00 / 00:00