DarioHealth Corp.

Greetings and welcome to Dario Health Corps Third Quarter 2021 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during today's conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Glenn Garmont, Investor Relations. Thank you, Stuart. You may begin.

Thank you, Laura. Good morning, everybody, and thank you for joining us today for a discussion of Dario Health's third quarter 2021 financial results. Leading the call today will be Erez Rafael, CEO of Dario Health. He'll be joined by Zvi Ben-David, CFO, and Rick Anderson, President and General Manager of North America at Dario Health. After prepared remarks, we'll open the call for Q&A. 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 and recorded on November 16, 2021. Last night, we issued a press release announcing our financial results for the third quarter 2021. A copy of the release can be found on the investor relations page of Dario Health's website. Actual events or results may differ materially from those projected as a result of changing market trends. reduced demand, or the competitive nature of Dario Health'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 factor section and elsewhere in the company's 2020 annual report on Form 10-K, as well as the third quarter 2021 10-Q FOB last evening. 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 last night and in the company's filings with the SEC. In addition, certain non-GAAP financial measures may be discussed during this call. 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 of and assessment of the company's ongoing core operations and prospects for the future. A reconciliation of non-GAAP measures to the most comparable GAAP measures is included in today's press release regarding quarterly and year-to-date results. And with that, I'd like to introduce Arez Rafael, Chief Executive Officer of Dario Health. Arez?

Thank you, Glenn. Good morning, everyone, and thanks for joining our call this morning. Well, this quarter was one of the most exciting quarters for us, as we have seen all the strategic pieces that we put together in the last two years coming together in a very impressive way. So in the last couple of years, we are talking about a few main pillars. Number one is the fact that the company is moving into platform that is multi-condition. We always thought that the market is gonna consolidate and we're gonna see the digital therapeutics industry coming together into one platform. The second pillar is about the fact that we are moving the company from direct-to-consumer into the B2B2C, in other words, selling into the payer's market, employer's market, and the provider's market. And in the last four or five months, we have seen that these two pieces came together in a very nice way on the multi-condition platform, post-building organically all the metabolic pieces in the last few years, diabetes, hypertension, and weight loss, We also made two acquisitions earlier this year, Upright and WayForward for MSK and also for behavioral health. And further than that, we showed a very strong execution capabilities by the fact that we managed to integrate the Upright solution into the Dario platform. And we launched a few weeks ago the Dario Move, which is the MSK solution for Dario. And we're going to also integrate the behavioral health part in Q4. So in terms of... Performing the acquisitions, getting the technology integrated into the platform, we moved very fast and we created one integrated platform, which is one of the most comprehensive platforms today in the industry, and we see a lot of very positive feedback from clients. Even more impressive is what we have shown in the last four or five months in terms of getting accounts signed. We keep talking about the three main channels, providers, employers and health plans. And today we have accounts that have been signed on all the three channels. actually, we had in Q1 around five accounts. Today, we have 47. So in the last four or five months, we have seen 85% of the accounts that we have ever signed in the last few months, and we think that this momentum is going to continue into the end of the year and into next year. So it's not about the number of accounts. It's also about The quality of the accounts, one of the accounts, as you probably know, is a big national health plan that signed with the company. I think that this is something that gives us a lot of credibility, and this is something that should have a significant impact on our financial profile. Further than that, we also showed that few of the accounts that we have signed are also for multi-condition. And I think that this is another very important indication that the company strategy is the right strategy because today we are not just selling into the multiple channels, we are also selling multiple product lines and we are selling the full suite, which is something that we thought from the first place that clients are going to be very interested in. So overall, we see that we are getting a full validation for both the channels and the offering of the company. And I think that the fact that all these points had happened in the last four to five months are telling the best story about our ability to execute on the strategy. In terms of the pipeline, We reported that the pipeline has continued to be strong and it's above $1 billion. Obviously, we deducted from the pipeline the accounts that we signed on. So practically, all those that have been signed and are going into implementation are not part of the billion dollar, which means that we had a significant growth in the pipeline as well. And another very important data point is the fact that 80% of what we have in the pipeline is for a multi-condition platform. So, again, it shows that we built the right platform and the right offering to the environment under which we are operating today. Overall, we see more excitement. Overall, we see more interest. And overall, we see that we are operating in the best demanding environment that we have seen since the inception of this company. Overall, we see the momentum continue into the end of the year and into 2022. And we think that we're going to have more accounts before the end of the year. A few words about the industry. So we see that the industry is moving from a doctor first, what the telemedicine companies are selling, into consumer first and it's very important to understand the difference between telemedicine to digital therapeutics we are creating a consumer first platform and the industry is moving into digitalization and into value-based and this is all the pieces that digital therapeutics platforms are providing including Dario and we are selling it in a model that we like to call it digital therapeutics as a service. So overall we see that we are starting to be a lead in the category and From here, I want to move to a few of the financial results of the quarters. Overall, we were growing by 176%. This is a very robust growth, and in terms of the performer growth margins, we reported 45% growth margins in comparison to 26.9% that we had a year ago. Overall, we still think that we are in the trajectory to generate growth margins that are above 70%. We think that the more we're going to move into the B2B, the more revenues are going to come from the B2B, the higher is going to be the growth margins, and we think that we're going to operate a kind of a SaaS model company. We see how all these strategic initiatives of multi-condition, Plus, the movement into the payrolls market is creating – these two vectors are creating a compounding impact on our ability to generate revenue. And we think that this is something that will have a significant impact on our numbers in 2022. And we're going to see in 2022 a significant ramp-up in our run rate. On the financial profile side, I just want to remind you how these two vectors are working together. So on a single account that we are signing, a company that has a single condition, and most of the digital health companies are managing either diabetes or hypertension or MSK, usually 8% to 15% of the population have a single condition. a single condition. When we are moving from single condition to multi-condition, we have a few KPIs that are improving drastically. One is the number of eligible members that are eligible to one or more of our products. So on a multi-condition, we see the numbers going from like 8% to 15% to 40%. And the output, the average revenue per user, is something that is much higher. It's going from $60 to $90. These two parameters together under the same assumptions of enrollment rate is something that is generating between 5 to 7x more dollars per every account under which we are implementing. And this is something that is not reflected yet in the revenues that we are generating today, but definitely will be reflected in the revenues that we are generating next year. Overall, on the implementation side, we are doing a good job here as well. On the accounts that we are already implementing, we are above 40% enrollment rate, and the retention rate is in the trajectory of 80% retention year over year. With that, I want to hand over the call to Rick to give you a deeper insight into the accounts and into the implementation.