DarioHealth Corp.

Good morning and welcome to the Dario Health First Quarter 2022 results call. All participants will be in listen-only mode. If 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. Please note that this event is being recorded. Now I'd like to turn the call over to Mr. Glenn Gutmann, Ambassador Relations.

Please go ahead. Thank you, Nick. Good morning, everybody, and thank you for joining us today for a discussion of Dario Health's first quarter 2022 financial results. Leading the call today will be Erez Raphael, CEO of Dario Health. He'll be joined by 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 May 12, 2022. This morning, we issued a press release announcing our financial results for the first quarter 2022. A copy of the press 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 2021 annual report on Form 10-K, as well as the first quarter 2022 Form 10-Q filed this morning. Additional information concerning factors that could cause results to differ materially from the company's 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. 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 and 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 today's press release regarding our quarterly results. With that, I'd like to introduce Erez Raphael, Chief Executive Officer. Erez?

Thank you, Glenn, and thanks everyone for joining us this morning. So, for all of you that know the story, you know that we are very, very consistent with the story for the last few years. We always talked about a few pillars, the multi-condition direction. with the acquisitions that we did in order to develop the best digital therapeutics company in the world that supports multiple conditions. We talked about moving from direct to consumer to B2B, and we talked also about a super user-centric business model with such kind of revenue, recurring revenue, that end up with high gross margins, which is something that Super relevant for software company like Dario. I think that in Q1, we are starting to show how all these strategic decisions are reflecting in the way that we operate and also in our financial profile. I think that as management, we knew how the market is going to evolve. We knew that healthcare will be super consumer-centric and we knew that it will have to be more digital. We made all these decisions and we start to see in this quarter where it's going to take us to. And I think that if you're going to look on all the financial profile of this quarter, you can see that we improved almost all the parameters. Starting from the top line, the merge between direct-to-consumer to B2B, the profitability and the gross margins, we have seen a significant improvement. We've seen reduction in the operating expenses. Mainly because we are shifting the business from direct-to-consumer to B2B, so we spend less money on digital ads. And the most important thing is also the loss in this environment. We showed a significant reduction in the loss for the quarter, and I'm going to... Get into the numbers shortly, but before that, I want to talk about a few fundamentals development that we had this quarter. So we signed overall 14 new accounts, including two health plans. Health plans are super important for our business. Usually they are providing much higher revenue per account. Overall, we have 61 accounts so far. 80% of them started launch. Overall, We have a total ARR of $40 million in a full implementation of this account. If we are looking on another very, very strategic activity that we had in this quarter was the Sanofi Agreement. We started the relationship a couple of months ago. We are making progress very well, and we have here two elements that we need to consider. One is the offering. We think that with the capabilities of Sanofi and the digital therapeutics platform that we have, we can create an offering that is going to be first in class in the market also moving forward. So the R&D teams are already working together, and we're going to get the best platform in the world. Also on the commercial side, in addition to a $30 million that will be paid by Sanofi to Dario, from which eight are going to be paid this year, we're also working together with the commercial team in order to push the solution into the market. We started in the U.S. with health plans. Rick is going to elaborate about it. Another important point, is the strategy of multi-condition that we have. And this is something that proved to be a very smart decision, not only from a financial profile, but also from a go-to-market perspective. We are getting more and more demand to the multi-condition, and we think that a significant portion of the accounts that we're going to sign this year and next year are going to be for the full suite. Also on the implementation side, We are making a nice traction and keeping above 35% enrollment rate for the accounts that we are launching. Few highlights on our financials. So we ended the quarter with above $8 million in revenue, which is 124% higher than what we showed in Q1 of 2021. And it's also approximately 34% higher Thank you very much. and Sanofi is going to contribute $8 million for the year. It had also contribution for this quarter. And just as a reminder, this is a multi-year contract that will contribute revenue also in the next quarters and also next year and the year after. So this is also something that is going to strengthen our financial profile. In terms of expenses, if we are looking on the overall expenses excluding the stock-based compensation, Acquisition Expenses and Depreciation. On the first quarter of 2022, we managed to reduce the overall expenses to 14.8. If we compare it to Q4 of 2021, it was 16.4. So this is a good reduction and I think that we're going to see this trend moving on to the next quarter because one of the things that we are starting to stop doing is investing a significant budget into the direct-to-consumer. We are moving budget to the B2B. which is something that is more cost-effective in terms of cost per acquisition, and that's something that would also help improve the financial profile. On the gross margins, on the non-GAAP, we showed 61%. We talked about it in the last quarter. Eventually, the goal of the business is to be above 70%, 75%. That's the goal of the business. We talked about it a couple of months ago and we guided somewhere between 50% to 60%. And now we see that it's around 61% on a non-GAAP base. We're going to continue this trend. Overall, it's not going to be super stable in the next few quarters, but overall it's going to be in these ranges and we're going to keep improving it. We are confident with the goal of 70% to 75% moving forward. So we are very, very positive about the gross margins as well. On the operating loss, this one we showed a significant reduction. We had a 14.9% Thank you very much. Operate in this environment and be super effective. So this is something that we are very proud in this 35% reduction. Overall, if we are looking on the burn rate, we had a burn that showed up a bit high. This is something that is not a run rate. It's temporary. We build a significant size of inventory. We are operating in a very challenging environment from a supply chain standpoint. And with so many accounts that we have signed and we need to launch, We felt that in order to put the business in the right situation, we need to have a higher than usual inventory. So we built more inventory in Q4 and in Q1. So we paid for that. This is one thing. Another thing is that payments that we should get or already got from Sanofi and others showed up only in Q2. So this is something that was showing a bit higher than the usual run rate. So I wouldn't be too worried about the burn. It's temporary for Q1. Looking on the overall balance sheet, we raised additional $40 million in Q1, which is something that was in addition to $36 million that we ended the year. So from a cash position, we feel super confident that we have the cash to execute on our plans and we have cash to get into 2024. So with that, I want to hand over the call to Rick to give you additional insights on what's going on on the commercial side. Rick?