DarioHealth Corp.

Good morning, ladies and gentlemen, and welcome to the Dario Health third quarter 2024 results call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on November 7th, 2024. I would now like to turn the conference over to Kat Pirelia, Investor Relations Manager at Dario, please go ahead.

Thank you, Operator, and good morning, everyone. Thank you for joining us today for a discussion of Dario Health's third quarter 2024 financial results. Leading the call today will be Erez Rafael, CEO of Dario Health. He'll be joined by Stephen Nelson, Chief Commercial Officer. 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 Thursday, November 7th, 2024. This morning, we issued a press release announcing our financial results for the third quarter of 2024. 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 that 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 third quarter 2024 quarterly report on Form 10-K. 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. These non-GAAP measures were 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. The reconciliation of these non-GAAP measures to the most comparable GAAP measures is included in this morning's press release. With that, I'd like to introduce Erez Rafael, CEO of Dario Health.

Thank you, Kat. Good morning, everyone. Thank you for joining us today for Dario Health's third quarter learning course. Over the past few quarters, we have made bold strategic moves to establish Dario as one of the leading forces in the digital health space, even in a challenging market environment. Dario now offers one of the most comprehensive digital health platforms in the industry, supporting six different chronic conditions, including diabetes, hypertension, weight management, muscle and skeletal pain, behavioral health, and maternity support. Our offering expansion in metabolic health has been organic while we expanded into other areas for strategic acquisitions. The recent acquisition of Twill exemplifies this strategy, adding robust behavioral health capabilities and advanced navigation tools to guide clients in matching patients to a popular therapeutic area. With Twill now integrated, Dyer provides unmatched consumer-centric personalized health solutions making it the most comprehensive platform on the market. This quarter represents a crucial step towards positioning Dario as a software-as-a-service-like business with high gross margins, targeting over 80% and a strong recurring revenue model. Today, we are excited to share how these strategic initiatives are delivering tangible results. with a significant improvement across all financial metrics, including growth in our top line, a reduction in operating expenses, and a substantial decrease in net loss. Additionally, Q3 marks a period of robust business momentum with 10 new client wins this quarter alone. We are also in a process of securing approximately five more clients before the end of the year. which would bring our total client points for the second half of the year to something between 17 to 20 new clients. This strong business momentum highlights the increasing demand for our comprehensive platform and our ability to deliver value to growing local clients. For Q3, we reported $7.42 million in revenue. representing 18.7% increase over Q2 of 2024, and an impressive 111% year-over-year growth. This growth is largely fueled by our core B2B2C business, which has become the engine of the revenue base. Through continued optimization of revenue channels and shift towards the current revenue models, Gross margins for the B2B2C business rose to 83%, with full business growth margins reaching 70% on a non-GAAP base. This improvement reflects our commitment to enhancing the quality and the predictability of our revenues. Following the recent merger with TWIL, Dariel implemented focused cost management strategies, reducing non-GAAP operating expenses to $12.3 million, a 15.9% sequential decline from Q2 2024. This disciplined approach to cost management has been essential in driving margin expansion and operational efficiency. Looking ahead, we are confident that the improvement in our financial profile will continue into the next few quarters. The cost reduction initiatives we initiated earlier this year are not fully reflected in our current numbers yet. As these efforts mature, we expect to see even a greater reduction in Q4 2024 and Q1 2025, with projected 59% reduction in non-GAAP operating losses from Q1 2024 to Q1 2025. This process keeps us firmly on track to reach a cash flow break-even run rate by the end of 2025. Now, I would like to turn it over to our Chief Commercial Officer, Stephen Nelson, who joined us earlier this year. Stephen has been instrumental in defining our commercial strategy and strengthening our client operations, which is key to sustaining the strong business momentum we are experiencing. We acknowledge that in the past, while we were successfully one client, it was challenging to fully realize revenues from this partnership, to our improved client operations, we are now focused on converting new clients' logos into meaningful revenues more efficiently. Steven will share how these strategic enhancements are helping to drive growth, both by deepening relationships with existing clients and partners, and by expanding our reach into new client segments.