DarioHealth Reports First Quarter 2024 Financial and Operating Results

 

  • First quarter revenue of $5.8 million reflects an increase of 59% over fourth quarter of 2023 primarily resulting from an increase in B2B2C revenues and reflects a decrease of 18.5% compared to the first quarter of 2023 due to milestone driven revenues.
  • Core revenue channel B2B2C, employers and health plans recurring revenues in the first quarter totaled $3.47 million, an increase of 176% year over year and 210% sequentially from $1.12 million in the fourth quarter 2023 as the core business continues to gain traction, as well as the addition of Twill Inc. revenues post February 15th closing
  • Launched the Aetna platform generating revenue in Q1 2024 as Aetna continues to add employers to the platform
  • Accelerated path to profitability through growing revenues in the B2B2C channel which represents proforma of $22M in annual recurring revenue (“ARR”)
  • Executing on Dario-Twill synergies that we expect to reduce operating expenses by 30% by the fourth quarter of the year
  • Company anticipates reaching a breakeven run rate in the second half of 2025
  • Ended Q1 2024 with cash equivalents of $34.7 million
  • Company to host investor conference call and webcast at 8:30 a.m. ET today.
Q1 2024 and Recent Highlights

New York, May 15, 2024 – DarioHealth Corp. (Nasdaq: DRIO) (the “Company”), a leader in the global digital health market, today reported financial results for the first quarter 2024.

“In the first quarter, our revenue increased by 59% over the fourth quarter 2023 reflecting organic growth with our legacy business-to-business-to-consumer (B2B2C) business, as well as post-acquisition revenue from our recent acquisition of Twill Inc. (“Twill”). B2B2C revenue as a portion of total revenue grew to 60% in Q1 2024 versus 31% in 4Q 2023. The legacy Dario B2B2C channel revenue grew 38% sequentially over the fourth quarter of 2023, primarily due to the launch of the Aetna platform, expansions of existing customer contracts and new customer launches. We expect the growth to continue into the second quarter as we recognize the benefit from customers that launched mid-first quarter and in the second quarter, and as we see a full quarter of revenues from Twill.

We believe we reached a major turning point in the scaling of our business and the acceleration of our path to profitability, with our new customer launches in the B2B2C channel, coupled with high margin revenue scale, operational efficiencies and product expansion added through the Twill acquisition. We believe that we can achieve significant revenue growth in our core business on a combined basis in 2024, and even greater growth anticipated in the longer term, including cross sell opportunities that we are currently executing on. Based on our current performance, we expect these high margin B2B2C revenues to account for about 80% of our total business by 2025. Coupled with cost synergies that will continue to aid a reduction in operating expenses, we believe we are on track to reach breakeven in the second half of 2025.

Among the three commercial channels we have today, our core B2B2C business channel, which represents recurring revenue from health plans and employers, is now our largest channel with approximately $22 million in annual recurring revenue. Our historical direct to consumer (B2C) business remains at its consistent run rate. Our third channel, commercial strategic, relates to revenue from partners like Sanofi U.S. and is milestone-based revenue, measured on an annual basis. Gross profit for the first quarter of 2024 was $2.4 million. Gross profit, excluding amortization of acquired technology was $3.6 million, increased to 62.4% from 34.2% in the fourth quarter of 2023, as we continue to increase our higher margin B2B2C revenue as a portion of our overall revenue.

In the first quarter of 2024, our operating expenses were $20.3, an increase of 30.3% compared to operating expenses of $15.6 in the first quarter of 2023, and $14.3 million in the fourth quarter of 2023. Our non-GAAP operating expenses excluding stock-based compensation, acquisition related expenses and depreciation increased by 19% compared to the first quarter of 2023. The increase is due to an increase in operating expenses as a result of the acquisition of Twill. However, we have worked diligently to implement our cost synergy plan in the second quarter which is expected to result in a 30% reduction in operating expenses by the fourth quarter of 2024 based on actions already taken, enabling us to reach profitability,” stated Erez Raphael, Chief Executive Officer of Dario.

“The acquisition of Twill is truly transformative for Dario. It brings immediate advantages – significant high margin revenue streams, an expanded value proposition, larger operational scale, and a strengthened market presence. Together, Dario and Twill have well-established relationships with three of the top eight national health plans, some of the largest self-insured technology companies, and several major pharmaceutical companies. We’ve created one of the most comprehensive digital health platforms, spanning from emotional well-being to the management of costly chronic conditions Another aspect of our business that has been expanded on with the additional conditions we now cover, is the collection of billions of data points from millions of users between Dario and Twill. Our collection of data points is now not only deeper, but far more comprehensive on a level that is unique to Dario. Generative artificial intelligence (AI) microservices are being implemented in multiple industries. In healthcare, we believe it will promote drug discovery and consumer engagement and personalization. Over time, proprietary data sets have the potential to be monetized either internally through the creation and augmentation of services or externally through IP licensing and/or strategic transactions. We believe that the comprehensive data set we have, and the scale of this data set, is an asset that will be valuable for running such models and will position us well to be part of this revolution. Twill’s innovative engagement strategies and broader offerings are already generating significant traction. Integration with Twill is well underway, and we’re exceeding expectations with client traction. We’ll continue to share updates on our progress in future quarters. With our strong cash position, we believe that we are well-equipped to execute our strategy and solidify Dario’s leadership in the digital health space,” Mr. Raphael concluded.

“Dario’s legacy B2B2C business channel saw a notable increase in revenue during the first quarter of 2024, driven by the launch of several new customers. This includes the launch of the Aetna behavioral platform with approximately a dozen customers, and Aetna continues to add customers to the platform. A separate self-help program contracted with Aetna last year launched on the platform at the end of the first quarter and is also expected to grow throughout 2024. In addition to these first quarter launches, we anticipate several additional new customer launches in the second quarter, which positions us for continued revenue growth in the near and longer term.

The employer sales cycle for 2024 launches is off to a strong start with the highest number of opportunities in Dario’s history. Encouragingly, the opportunity size and the proportion of opportunities coming from benefit consultants has also increased, which we believe reflects increasing ability to scale revenues. There continues to be strong interest in the market for our GLP-1 solution, for which we announced six new customers in the last few months. While health plan cycles are longer, we continue to see good traction with plans and anticipate adding new health plan customers, both directly and through partnerships, including another national health plan during 2024. We are also engaged with several cross selling opportunities,” stated Rick Anderson, Dario’s President. “The Twill acquisition has increased our opportunities through product extension, differentiation and pre-existing stand-alone sales opportunities. Excitingly, customers from both companies have expressed interest in exploring the combined product offerings, potentially opening doors for future cross-selling initiatives,” concluded Mr. Anderson.

Q1 2024 and Recent Highlights

Completed the transformational acquisition of Twill in Q1 of 2024 concurrent with a $22.4 million equity financing. The acquisition was immediately accretive to revenues, gross margins, and go-to-market strategy.
Made meaningful progress in multiple areas with the new Dario GLP-1 Behavioral Change Program. We saw significant interest and adoption of the program and new contracts with multiple employers.
Launched more than a dozen new customers and partners on the platform in the first quarter of 2024, with additional recently signed customers expected to launch in the second quarter of 2024.
Began to see revenues from the Aetna private labeled platform which launched in Q1 of 2024 with multiple employer groups and have seen additional Aetna customer bookings throughout the first quarter.
Announced two new studies published in the leading peer-reviewed journal for digital health and medicine, Journal of Internet Medicine (JMIR), including a Randomized Controlled Trial (RCT) demonstrating the impact of a digital stress reduction program for teens.
Announced new research published in the leading peer-reviewed journal for digital health and medicine, Journal of Internet Medicine (JMIR) demonstrating a clinically significant reduction in blood glucose levels for members using Dario to manage weight alongside diabetes.
Announced two new clinical studies presented at the 17th International Conference on Advanced Technologies and Treatments for Diabetes (ATTD) 2024, demonstrating the ability to deliver improved health outcomes with integrated solutions for members managing weight and blood glucose with or without GLP-1 medications.
Continued to demonstrate the strength of Dario’s multi-condition suite, with more than 80% of pipeline opportunities for multi-condition contracts.

First Quarter 2024 Results Summary

Revenues for the first quarter ended March 31, 2024, were $5.8 million, an 18.5% decrease from $7.1 million for the first quarter ended March 31, 2023, and an increase of 59% from $3.6 million for the fourth quarter of 2023. The decrease compared to the quarter ended March 31, 2023, resulted from a decrease in revenues from the strategic partner channels, partially offset by the consolidated revenues of Twill commencing February 16, 2024. The reason for the increase from the fourth quarter of 2023 was the increase in B2B2C revenues and the consolidation of Twill revenues.

B2B2C, employers and health plans recurring revenues for the first quarter ended March 31, 2024, were $3.47 million compared to $1.26 million in the quarter ended March 31 2023, representing an increase of 176%, and compared to $1.12 million in the fourth quarter of 2023, representing an increase of 210% sequentially.

Gross profit for the first quarter ended March 31, 2024, was $2.4 million, a decrease of $0.7 million, compared to gross profit of $3.1 million for the first quarter of 2023, and an increase of 1,742% from $132,000 for the fourth quarter of 2023. The reason for this increase is the increase in our B2B2C revenues and the consolidation of Twill revenues. Gross profit as a percentage of revenues decreased to 42.2% in the first quarter of 2024, from 44.8% in the first quarter of 2023, and increased from 3.7% in the fourth quarter of 2023.

Pro-forma gross profit, excluding $1.2 million of amortization expenses related to the acquisition of technology, was $3.6 million, or 62.4% of revenues, for the three months ended March 31, 2024, compared to pro-forma gross profit of $4.2 million, or 60.1% of revenues, for the three months ended March 31, 2023, and a pro-forma gross profit of $1.2 million, or 34.2% of revenues, for the three months ended December 31, 2023. A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Total operating expenses for the first quarter ended March 31, 2024, were $20.3 million compared with $15.6 million for the first quarter ended March 31, 2023, and $14.3 million for the fourth quarter of 2023, an increase of $4.7 million, or 30.3%, compared to the first quarter of 2023, and an increase of $6.0 million, or 41.4%, compared to the fourth quarter of 2023. The increase compared to the first quarter ended March 31, 2023, and compared to the fourth quarter of 2023, resulted mainly from the acquisition of Twill and an increase in stock-based compensation expenses. Total operating expenses excluding stock-based compensation, acquisition related expenses and depreciation for the first quarter of 2024 were $12.7 million compared to $10.6 million for the first quarter of 2023, and $9.9 million for the fourth quarter of 2023.

Operating loss for the first quarter of 2024 was $17.9 million, an increase of $5.5 million, or 44%, compared to $12.4 million for the first quarter of 2023, and an increase of $3.7 million, or 26%, compared to $14.2 million for the fourth quarter of 2023. The increase compared to the first quarter of 2023 and the fourth quarter of 2023 was due to the increase in operating expenses.

Financing income was $8.7 million for the first quarter of 2024, compared to financing expense of $0.4 million for the first quarter of 2023. The reason for this increase was the revaluation of the pre-funded warrants issued as part of the consideration for the acquisition of Twill, due to its classification as a liability according to GAAP rules.

Net loss was $7.2 million in the first quarter of 2024, a decrease of $5.6 million, or 44%, compared to a net loss of $12.8 million in the first quarter of 2023, and a decrease of $7.1 million, or 50%, compared to $14.3 million in the fourth quarter of 2023.

Net profit excluding stock-based compensation, acquisition related expenses and depreciation for the first quarter of 2024 was $1.6 million compared to a loss of $6.8 million for the first quarter of 2023, and $8.4 million in the fourth quarter of 2023.

Non-GAAP billings for the three months ended March 31, 2024, were $5.8 million, a 13% decrease from $6.7 million for the three months ended March 31, 2023. The decrease is a result of lower sales generated in the three months ended March 31, 2024, compared to the three months ended March 31, 2023. A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Date: Wednesday, May 15th, 8:30am ET

Dial-in Number: 1-888-886-7786 (domestic) or 1-416-764-8658 (international)

Call me™: https://emportal.ink/3VOj7AC.

Participants can use the dial-in numbers above and be answered by an operator OR click the Call me™ link for instant telephone access to the event. This link will be made active 15 minutes prior to scheduled start time.

Webcast link: https://viavid.webcasts.com/starthere.jsp?ei=1665723&tp_key=25034c019e

Participants are asked to dial in approximately 10 minutes prior to the start of the event. A replay of the call will be available approximately two hours after completion through Saturday, June 15th, 2024. To listen to the replay, dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and use replay passcode 02490000.

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About DarioHealth Corp.

DarioHealth Corp. (Nasdaq: DRIO) is a leading digital health company revolutionizing how people with chronic conditions manage their health through a user-centric, multi-chronic condition digital therapeutics platform. Our platform and suite of solutions deliver personalized and dynamic interventions driven by data analytics and one-on-one coaching for diabetes, hypertension, weight management, musculoskeletal pain and behavioral health.

Our user-centric platform offers people continuous and customized care for their health, disrupting the traditional episodic approach to healthcare. This approach empowers people to holistically adapt their lifestyles for sustainable behavior change, driving exceptional user satisfaction, retention and results and making the right thing to do the easy thing to do.

Dario provides its highly user-rated solutions globally to health plans and other payers, self-insured employers, providers of care and consumers. To learn more about Dario and its digital health solutions, or for more information, visit https://www.dariohealth.com